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The Effect of Monetary and Fiscal Credibility on Exchange Rate Pass-Through in an Emerging Economy

Listed author(s):
  • Helder Mendonça

    ()

  • Felipe Tostes

    ()

This study relates to the literature on the exchange rate pass-through effect on inflation for developing economies under inflation targeting. The novelty concerns the investigation of the effect of both monetary and fiscal credibility on pass-through. The article addresses empirical evidence, based on the Brazilian experience, regarding the idea that high credibility might reduce the exchange rate pass-through on inflation. The findings suggest that although monetary credibility is relevant only for pass-through on inflation of market prices, fiscal credibility is an important tool to reduce the pass-through on both inflation and inflation expectations. Copyright Springer Science+Business Media New York 2015

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File URL: http://hdl.handle.net/10.1007/s11079-014-9339-3
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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 26 (2015)
Issue (Month): 4 (September)
Pages: 787-816

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Handle: RePEc:kap:openec:v:26:y:2015:i:4:p:787-816
DOI: 10.1007/s11079-014-9339-3
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/economics/international+economics/journal/11079/PS2

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