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Exchange Rate Pass-Through in an Emerging Market: The Case of the Czech Republic

Author

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  • Jan Hajek

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic)

  • Roman Horváth

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic
    Institute for East and Southeast European Studies, Regensburg, Germany)

Abstract

We examine exchange rate pass-through, or how domestic prices respond to exchange rate shocks, in the Czech Republic from 1998 to 2013 by employing vector autoregression models. Using the aggregate consumer price index and its sub-components, we find that the degree of passthrough is incomplete except for food prices. The peak response occurs between 9 and 13 months after the exchange rate shock. The long-term pass-through is approximately 50% at the aggregate level. The degree of pass-through is greater for tradables than for non-tradables. The results also suggest that the exchange rate pass-through becomes slower but more complete during the financial crisis experienced in period considered.

Suggested Citation

  • Jan Hajek & Roman Horváth, 2015. "Exchange Rate Pass-Through in an Emerging Market: The Case of the Czech Republic," Working Papers IES 2015/08, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2015.
    • Handle: RePEc:fau:wpaper:wp2015_08
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    File URL: http://ies.fsv.cuni.cz/sci/publication/show/id/5278/lang/cs
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    Cited by:

    1. Vugar Rahimov & Nigar Jafarova & Fuad Ganbarov, 2017. "The Exchange Rate Pass-Through to CPI and its components in Oil-Exporting CIS Countries," IHEID Working Papers 06-2017, Economics Section, The Graduate Institute of International Studies.
    2. Tunç, Cengiz, 2017. "A Survey on Exchange Rate Pass through in Emerging Markets," Bulletin of Economic Theory and Analysis, BETA Journals, vol. 2(3), pages 205-233, July-Sept.
    3. Mirdala, Rajmund, 2015. "Exchange Rate Pass-Through in the Euro Area," MPRA Paper 68862, University Library of Munich, Germany.
    4. Rajmund Mirdala, 2016. "Exchange Rate Pass-Through to Domestic Prices in the European Transition Economies," Working Papers 361, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).

    More about this item

    Keywords

    exchange rate pass-through; Czech Republic; inflation; vector autoregression;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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