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Exchange Rate Pass-Through To Domestic Prices: The Case Of Colombia

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  • Peter Rowland

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Abstract

This study uses two different econometric frameworks to study exchange rate passthrough 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.

Suggested Citation

  • Peter Rowland, 2003. "Exchange Rate Pass-Through To Domestic Prices: The Case Of Colombia," BORRADORES DE ECONOMIA 002683, BANCO DE LA REPÚBLICA.
  • Handle: RePEc:col:000094:002683
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    Cited by:

    1. Andrés González & Omar Mendoza & Hernán Rincón & Norberto Rodríguez, 2010. "Ciclo económico y efecto inflacionario de la depreciación de la moneda," Borradores de Economia 611, Banco de la Republica de Colombia.
    2. Andrés González & Hernán Rincón & Norberto Rodríguez, 2008. "La transmisión de los choques a la tasa de cambio sobre la inflación de los bienes importados en presencia de asimetrías," Borradores de Economia 532, Banco de la Republica de Colombia.
    3. International Monetary Fund, 2016. "Colombia; Selected Issues," IMF Staff Country Reports 16/134, International Monetary Fund.
    4. Hernán Rincón & Édgar Caicedo & Norberto Rodríguez, 2007. "Exchange Rate Pass-Through Effects:A Disaggregate Analysis Of Colombianimports Of Manufactured Goods," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 25(54), pages 90-121, June.
    5. Atif Ali Jaffri, 2010. "Exchange Rate Pass-through to Consumer Prices in Pakistan: Does Misalignment Matter?," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 49(1), pages 19-35.
    6. Carmen Astrid Romero, 2012. "El efecto transmisión del tipo de cambio en Colombia durante los años de la industrialización," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 30(67), pages 216-251, July.
    7. Dubravko Mihaljek & Marc Klau, 2008. "Exchange rate pass-through in emerging market economies: what has changed and why?," BIS Papers chapters,in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 103-130 Bank for International Settlements.
    8. Andrés González & Hernán Rincóm & Norberto Rodríguez, 2008. "La transmisión de los choques a la tasa de cambio sobre la inflación," BORRADORES DE ECONOMIA 005089, BANCO DE LA REPÚBLICA.
    9. Hernán Rincón & Édgar Caicedo & Norberto Rodríguez, 2007. "Exchange Rate Pass-Through Effects:A Disaggregate Analysis Of Colombianimports Of Manufactured Goods," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, vol. 25(54), pages 90-121, June.

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