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The Exchange Rate and Consumer Prices


  • Elaine Chung

    (Reserve Bank of Australia)

  • Marion Kohler

    (Reserve Bank of Australia)

  • Christine Lewis

    (Reserve Bank of Australia)


This article reviews the empirical evidence on exchange rate pass-through to consumer prices in Australia over the inflation-targeting period. It finds that pass-through is relatively low at the aggregate level but is faster and larger for the prices of manufactured goods, which are often imported. There is some evidence that over the past decade exchange rate movements have been flowing through more quickly to retail prices for this subset of highly tradable goods. Looking ahead, the growth of the internet with the greater ability of households to compare prices and to buy from overseas are likely to result in smaller cross-country price differentials and more rapid pass-through from the exchange rate to prices.

Suggested Citation

  • Elaine Chung & Marion Kohler & Christine Lewis, 2011. "The Exchange Rate and Consumer Prices," RBA Bulletin, Reserve Bank of Australia, pages 9-16, September.
  • Handle: RePEc:rba:rbabul:sep2011-02

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    References listed on IDEAS

    1. Tony Richards & Glenn Stevens, 1987. "Estimating the Inflationary Effects of Depreciation," RBA Research Discussion Papers rdp8713, Reserve Bank of Australia.
    2. Gruen, David & Pagan, Adrian & Thompson, Christopher, 1999. "The Phillips curve in Australia," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 223-258, October.
    3. Jeannine Bailliu & Wei Dong & John Murray, 2010. "Has Exchange Rate Pass-Through Really Declined? Some Recent Insights from the Literature," Bank of Canada Review, Bank of Canada, vol. 2010(Autumn), pages 1-8.
    4. David Norman & Anthony Richards, 2010. "Modelling Inflation in Australia," RBA Research Discussion Papers rdp2010-03, Reserve Bank of Australia.
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    Cited by:

    1. repec:rba:rbabul:sep2017-01 is not listed on IDEAS
    2. Kevin Lane & Tom Rosewall, 2015. "Firm-level Capacity Utilisation and the Implications for Investment,Labour and Prices," RBA Bulletin, Reserve Bank of Australia, pages 9-18, December.
    3. Alexander Ballantyne & Sean Langcake, 2016. "Why Has Retail Inflation Been So Low?," RBA Bulletin, Reserve Bank of Australia, pages 9-18, June.
    4. Alexander Beames & Michael Kouparitsas, 2015. "Modelling Australia’s imports of goods and services," Treasury Working Papers 2015-02, The Treasury, Australian Government, revised Jun 2015.
    5. Manalo, Josef & Perera, Dilhan & Rees, Daniel M., 2015. "Exchange rate movements and the Australian economy," Economic Modelling, Elsevier, vol. 47(C), pages 53-62.
    6. Christian Gillitzer & Angus Moore, 2016. "Trade Invoicing Currency and First-stage Exchange Rate Pass-through," RBA Research Discussion Papers rdp2016-05, Reserve Bank of Australia.
    7. Jared Bullen & Michael Kouparitsas & Michal Krolikowski, 2014. "Long run forecasts of Australia’s terms of trade," Treasury Working Papers 2014-01, The Treasury, Australian Government, revised May 2014.


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