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Exchange Rate Pass-Through in Pakistan

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  • Younus, Rijja Ali
  • Yucel, Eray

Abstract

Exchange rate pass-through, which is the degree of reflection of exchange rate movements on domestic inflation, is a crucial phenomenon especially for the developing economies. In this paper we study the exchange rate pass-through for the Pakistani economy from 2008 to 2019. Using quarterly data for consumer prices and the Pakistani Rupee – USD exchange rate and a simple econometric framework, we estimate the pass-through coefficients to various subgroup and item indices within Pakistani household consumption basket. Our findings indicate that pass-through behavior is limited to only some items, motivating us to develop an exchange rate sensitive items index to allow for better forecasting performance on the side of policymakers.

Suggested Citation

  • Younus, Rijja Ali & Yucel, Eray, 2020. "Exchange Rate Pass-Through in Pakistan," MPRA Paper 98955, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:98955
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    References listed on IDEAS

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    More about this item

    Keywords

    Exchange rate; ERPT; Pass-through; Pakistan; Inflation; Price level;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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