IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Pass-through from exchange rate to prices in Brazil:an analysis using time-varying parameters for the 1980 – 2002 period

Listed author(s):
  • Christiane R. Albuquerque; Marcelo S. Portugal
Registered author(s):

    The aim of the present paper is to analyze the pass-through from exchange rate to inflation in Brazil from 1980 to 2002. Initially, we developed a model of a profit-maximizing firm based on the pricing-to-market approach presented by FEENSTRA and KENDAL (1997). In order to adapt the model to the Brazilian reality, we considered the following aspects: (i) the firm sells its product both in the domestic market – where it has some pricing power – and in the foreign market – where it is a price-taker; (ii) costs are a function of the exchange rate; (iii) the degree of openness is included in the demand equation. Results show that the Kalman Filter yields better results than linear models with time-invariant parameters and that the inflationary environment and the exchange rate regime perceived by the agents affect the degree of pass-through. We can observe a reduction in the pass-through to consumer price indices (IPCA and IGP-DI) after the implementation of the Real plan, and a more intense reduction after the adoption of the floating exchange rate regime in 1999. These results are in line with other estimates presented in the literature. The pass-through to wholesale prices, however, is relatively constant and its levels are close to one throughout the period. This also seems to be a consistent result if we consider a small (price-taking) economy in the foreign market

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by Econometric Society in its series Econometric Society 2004 Latin American Meetings with number 166.

    in new window

    Date of creation: 11 Aug 2004
    Handle: RePEc:ecm:latm04:166
    Contact details of provider: Phone: 1 212 998 3820
    Fax: 1 212 995 4487
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ecm:latm04:166. 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: (Christopher F. Baum)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.