Pass-Through of External Shocks to Inflation in Sri Lanka
AbstractThis paper investigates pass-through of external shocks (exchange rate, oil price, and import price shocks) to inflation in Sri Lanka. The analysis is based on a vector autoregression (VAR) model that incorporates a distribution chain of pricing. The paper finds low and incomplete pass-through of external shocks to consumer inflation, reflecting a combination of factors including the existence of administered prices, high content of food in the consumption basket, and low persistence and volatility of the exchange rate. External shocks explain about 25 percent of the variation in consumer price inflation, reflecting room for domestic policies in controlling inflation.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 08/78.
Date of creation: 01 Mar 2008
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-10 (All new papers)
- NEP-CBA-2008-05-10 (Central Banking)
- NEP-MAC-2008-05-10 (Macroeconomics)
- NEP-OPM-2008-05-10 (Open Economy Macroeconomics)
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- Jongwanich, Juthathip & Park, Donghyun, 2009. "Inflation in developing Asia," Journal of Asian Economics, Elsevier, Elsevier, vol. 20(5), pages 507-518, September.
- Mohamed Z. M. Aazim & Nawalage S. Cooray, 2010. "Monetary Policy and Yield Curve Dynamics in an Emerging Market: Sri Lankan Perspectives," Working Papers, Research Institute, International University of Japan EMS_2010_11, Research Institute, International University of Japan.
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