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The Exchange Rate Pass-Through to CPI and its components in Oil-Exporting CIS Countries

Author

Listed:
  • Vugar Rahimov

    (Central Bank of the Republic of Azerbaijan)

  • Nigar Jafarova

    (Central Bank of the Republic of Azerbaijan)

  • Fuad Ganbarov

    (Azerbaijan National Academy of Sciences, Institute of Economics)

Abstract

In this study, we explore the pass-through of exchange rate fluctuations to domestic CPI and its components for Azerbaijan, Kazakhstan and Russia. Using the data of 2003:Q1-2016:Q2, we estimate a VAR model and find significant but incomplete pass-through in all sample countries. The accumulated pass-through to aggregate CPI within one year is 28 percent for both Azerbaijan and Kazakhstan; however the equivalent figure for Russia is 32 percent. According to our empirical findings the largest pass-through (ERPT) is observed in the non-food CPI in Azerbaijan and Kazakhstan, whereas in Russia the food prices demonstrate the greatest ERPT. Since the ERPT is an essential ingredient of price developments in sample countries, it should be assessed precisely and taken into account in monetary policy decisions and inflation forecasting.

Suggested Citation

  • 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.
  • Handle: RePEc:gii:giihei:heidwp06-2017
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    References listed on IDEAS

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    Cited by:

    1. Jamilu Iliyasu & Aliyu Rafindadi Sanusi, 2023. "The role of announced exchange rate policies on exchange rate pass-through to consumer prices in an oil-based small open economy," SN Business & Economics, Springer, vol. 3(1), pages 1-20, January.
    2. Richhild Moessner, 2022. "Exchange Rate Pass-Through to Food and Energy Consumer Price Inflation," CESifo Working Paper Series 10164, CESifo.

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    More about this item

    Keywords

    Exchange rate pass-through; VAR model; disaggregated CPI; oil exporting countries;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • 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
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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