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Exchange Rate Pass-Through in Turkey

  • Marco Rossi
  • Daniel Leigh
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    In light of the strong correlation between exchange rate movements and domestic prices in Turkey, it is important to assess the impact of the exchange rate on domestic prices, in particular as Turkey moves to an inflation targeting regime. This paper uses a recursive vector autoregression model to investigate the impact of exchange rate movements on prices in Turkey. We find that (i) the impact of the exchange rate on prices is over after about a year, but is mostly felt in the first four months, (ii) the pass-through to wholesale prices is more pronounced compared to the pass-through to consumer prices, and (iii) the estimated pass-through is complete in a shorter time and is larger than that estimated for other key emerging market countries.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/204.

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    Length: 18
    Date of creation: 01 Nov 2002
    Date of revision:
    Handle: RePEc:imf:imfwpa:02/204
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    1. Ashok Bhundia, 2002. "An Empirical Investigation of Exchange Rate Pass-Through in South Africa," IMF Working Papers 02/165, International Monetary Fund.
    2. Leo Bonato & Andreas Billmeier, 2002. "Exchange Rate Pass-Through and Monetary Policy in Croatia," IMF Working Papers 02/109, International Monetary Fund.
    3. 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.
    4. 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.
    5. Choudhri, Ehsan U. & Hakura, Dalia S., 2006. "Exchange rate pass-through to domestic prices: Does the inflationary environment matter?," Journal of International Money and Finance, Elsevier, vol. 25(4), pages 614-639, June.
    6. Ariel Burstein & Martin Eichenbaum & Sergio Rebelo, 2002. "Why Are Rates of Inflation So Low After Large Devaluations?," NBER Working Papers 8748, National Bureau of Economic Research, Inc.
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