Exchange Rate Pass-Throught to Domestic Prices: The Case of Colombia
This study uses two different econometric frameworks to study exchange rate pass-throught to import, producer and consumer prices in Colombia. Both frameworks are based on vector autoregressive (VAR) models, the first using an unrestricted VAR model, and the second using the Johansen framework of multivariate cointegration. Exchange rate pass-through is shown to be incomplete. Import prices, nevertheless, respond quickly to an exchange rate change, where some 80 percent of such a change is passed onto prices of imports within 12 months. The corresponding figure for producer prices is 28 percent and for consumer prices less than 15 percent, where for the latter the two different frameworks yield rather different results. We can, however, conclude that pass-through is modest for producer prices and very limited for consumer prices. An exchange rate shock does, therefore, only have little impact on consumer price inflation.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (57-1) 3431111
Fax: (57-1) 2841686
Web page: http://www.banrep.org/publicaciones/pub_borra.htm
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Schröder, Michael & Hüfner, Felix P., 2002. "Exchange rate pass-through to consumer prices: a European perspective," ZEW Discussion Papers 02-20, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Kim, Yoonbai, 1991. "External Adjustments and Exchange Rate Flexibility: Some Evidence from U.S. Data," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 176-81, February.
- Ilan Goldfajn & Sergio R.C. Werlang, 2000.
"The pass-through from depreciation to inflation : a panel study,"
Textos para discussão
423, Department of Economics PUC-Rio (Brazil).
- Ilan Goldfajn & Sérgio Ribeiro da Costa Werlang, 2000. "The Pass-through from Depreciation to Inflation: A Panel Study," Working Papers Series 5, Central Bank of Brazil, Research Department.
- Marston, Richard C., 1990. "Pricing to market in Japanese manufacturing," Journal of International Economics, Elsevier, vol. 29(3-4), pages 217-236, November.
- Geoff Kenny & Donal Mcgettigan, 1998. "Exchange rates and import prices for a small open economy: the case of Ireland," Applied Economics, Taylor & Francis Journals, vol. 30(9), pages 1147-1155.
- Jonathan McCarthy, 2000.
"Pass-through of exchange rates and import prices to domestic inflation in some industrialized economies,"
111, Federal Reserve Bank of New York.
- Jonathan McCarthy, 2007. "Pass-Through of Exchange Rates and Import Prices to Domestic Inflation in Some Industrialized Economies," Eastern Economic Journal, Eastern Economic Association, vol. 33(4), pages 511-537, Fall.
- J. McCarthy, 1999. "Pass-through of exchange rates and import prices to domestic inflation in some industrialised economies," BIS Working Papers 79, Bank for International Settlements.
- Pinelopi K. Goldberg & Michael M. Knetter, 1996.
"Goods Prices and Exchange Rates: What Have We Learned?,"
NBER Working Papers
5862, National Bureau of Economic Research, Inc.
- Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September.
- Prema-chandra Athukorala & Jayant Menon, 1992.
"Pricing to Market Behaviour and Exchange Rate Pass-Through in Japanese Exports,"
1992.32, School of Economics, La Trobe University.
- Athukorala, Premachandra & Menon, Jayant, 1994. "Pricing to Market Behaviour and Exchange Rate Pass-Through in Japanese Exports," Economic Journal, Royal Economic Society, vol. 104(423), pages 271-81, March.
- Wing T. Woo, 1984. "Exchange Rates and the Prices of Nonfood, Nonfuel Products," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 15(2), pages 511-536.
- Rudiger Dornbusch, 1985.
"Exchange Rates and Prices,"
NBER Working Papers
1769, National Bureau of Economic Research, Inc.
- Leonardo Villar & Hernán Rincón, 2000.
"The Colombian Economy In The Nineties: Capital Flows And Foreign Exchange Regimes,"
BORRADORES DE ECONOMIA
003575, BANCO DE LA REPÚBLICA.
- Leonardo Villar & Hernán Rincón, . "The Colombian Economy in the nineties: Capital Flows and Foreign Exchange Regimes," Borradores de Economia 149, Banco de la Republica de Colombia.
- Catherine L. Mann, 1986. "Prices, profit margins, and exchange rates," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jun, pages 366-379.
- Menon, Jayant, 1995. " Exchange Rate Pass-Through," Journal of Economic Surveys, Wiley Blackwell, vol. 9(2), pages 197-231, June.
- Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, March.
- Sven W. Arndt & J. David Richardson, 1987. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc.
- George A. Kahn, 1987. "Dollar depreciation and inflation," Economic Review, Federal Reserve Bank of Kansas City, issue Nov, pages 32-49.
- Feinberg, Robert M, 2000. "The Role of International Discipline in Three Developing Economies: Exchange Rate Effects on Domestic Prices in Colombia, Korea, and Morocco," Review of International Economics, Wiley Blackwell, vol. 8(1), pages 126-33, February.
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
- Zuzana Murgasova, 1996. "Exchange Rate Pass-Through in Spain," IMF Working Papers 96/114, International Monetary Fund.
- Taylor, John B., 2000. "Low inflation, pass-through, and the pricing power of firms," European Economic Review, Elsevier, vol. 44(7), pages 1389-1408, June.
- Joseph E. Gagnon & Jane Ihrig, 2001. "Monetary policy and exchange rate pass-through," International Finance Discussion Papers 704, Board of Governors of the Federal Reserve System (U.S.).
- Bernhofen, Daniel M. & Xu, Peng, 2000. "Exchange rates and market power: evidence from the petrochemical industry," Journal of International Economics, Elsevier, vol. 52(2), pages 283-297, December.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Feinberg, Robert M, 1991. "The Choice of Exchange-Rate Index and Domestic Price Passthrough," Journal of Industrial Economics, Wiley Blackwell, vol. 39(4), pages 409-20, June.
- Ki-Ho Kim, 1998. "US inflation and the dollar exchange rate: a vector error correction model," Applied Economics, Taylor & Francis Journals, vol. 30(5), pages 613-619.
- Paul Krugman, 1986. "Pricing to Market when the Exchange Rate Changes," NBER Working Papers 1926, National Bureau of Economic Research, Inc.
- Giovanni P. Olivei, 2002. "Exchange rates and the prices of manufacturing products imported into the United States," New England Economic Review, Federal Reserve Bank of Boston, issue Q 1, pages 3 - 18.
- Stanley W. Kardasz & Kenneth R. Stollery, 2001. "Exchange rate pass-through and its determinants in Canadian manufacturing industries," Canadian Journal of Economics, Canadian Economics Association, vol. 34(3), pages 719-738, August.
When requesting a correction, please mention this item's handle: RePEc:bdr:borrec:254. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Clorith Angélica Bahos Olivera)
If references are entirely missing, you can add them using this form.