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Incomplete Exchange Rate Pass-Through Transmission To Prices: An Svar Model For Tunisia

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  • FATMA MARRAKCHI CHARFI

    (LIEI, University of Tunis El Manar, B.P. 248 El Manar II 2092, 1068 Tunis, Tunisia‡Faculty of Economic Sciences and Management of Tunis, University of Tunis El Manar, B.P. 248 El Manar 2092, 1068 Tunis, Tunisia)

  • MOHAMED KADRIA

    (#x2020;LAREQUAD, University of Tunis El Manar, B.P. 248 El Manar 2092, 1068 Tunis, Tunisia‡Faculty of Economic Sciences and Management of Tunis, University of Tunis El Manar, B.P. 248 El Manar 2092, 1068 Tunis, Tunisia)

Abstract

In this paper, we tried to revisit the transmission degree of exchange rate variations to domestic prices (import prices, MPI; producer prices, PPI; and consumer prices, CPI) in Tunisia. To do this, we used the VAR–SVAR methodology, over the 2000:1–2013:12 period. The adopted mode is gathering national prices, nominal exchange rates, foreign prices and a control variable that is the interest rate. The findings highlights that the pass-through is incomplete for all considered prices. However, the degree of the exchange rate pass-through is the highest on import prices, is moderate on producer prices and is the lowest on consumer prices. Besides, the incomplete pass-through of MPI results from the pricing to market behavior and the lowest pass-through for CPI is due basically to the composition of this index which is administrated by 30% of its components. The impulse response functions analysis, that largely corroborates to the variance decomposition, shows that when the central bank conducts a restrictive monetary policy the inflation decreases without widening the output gap.

Suggested Citation

  • Fatma Marrakchi Charfi & Mohamed Kadria, 2016. "Incomplete Exchange Rate Pass-Through Transmission To Prices: An Svar Model For Tunisia," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 11(04), pages 1-23, December.
    • Handle: RePEc:wsi:afexxx:v:11:y:2016:i:04:n:s2010495216500172
    DOI: 10.1142/S2010495216500172
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    1. Mohamed Ilyes Gritli, 2021. "Price inflation and exchange rate pass‐through in Tunisia," African Development Review, African Development Bank, vol. 33(4), pages 715-728, December.

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