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What Do We Know of Exchange Rate Pass Through?

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  • Abdul Jalil

    (Pakistan Institute of Development Economics)

Abstract

Domestic prices in an open economy are influenced by fluctuations of exchange rates. The effect of exchange rate changes on the domestic prices is termed exchange rate pass through (ERPT). When the variations in exchange rate are fully transmitted in the domestic prices, then it is known as complete ERPT and vice versa. Theoretically, the degree and speed of ERPT varies for the different types of price indices. It is the lowest in consumer price index and the highest in import prices. The literature also bifurcates the first stage and second stage pass through.

Suggested Citation

  • Abdul Jalil, 2020. "What Do We Know of Exchange Rate Pass Through?," PIDE Knowledge Brief 2020:5, Pakistan Institute of Development Economics.
    • Handle: RePEc:pid:kbrief:2020:5
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    References listed on IDEAS

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    Cited by:

    1. Abdul Jalil, 2021. "Exchange Rate Policy Must Seek Undervaluation!," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 60(1), pages 85-91.

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