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Exchange Rate Pass-Through in Spain

Author

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  • Ms. Zuzana Murgasova

Abstract

This paper examines the factors underlying the stability of inflation observed following devaluations of the Spanish peseta, which took place during the 1992-93 Exchange Rate Mechanism (ERM) crisis. The long-run equilibrium relationships between the exchange rate and the aggregate price indices are estimated using the Johansen maximum likelihood-method. The short-run dynamics are obtained from error-correction models. The model is then simulated by calibrating changes in the exogenous variables to their actual values. The results indicate that the cost-push-up effect of devaluations may have been completely offset by determinants of the cyclical position of the economy and the low inflation rate in 1993-94 should not be viewed as unusual.

Suggested Citation

  • Ms. Zuzana Murgasova, 1996. "Exchange Rate Pass-Through in Spain," IMF Working Papers 1996/114, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1996/114
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    Citations

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    Cited by:

    1. Billmeier, Andreas & Bonato, Leo, 2004. "Exchange rate pass-through and monetary policy in Croatia," Journal of Comparative Economics, Elsevier, vol. 32(3), pages 426-444, September.
    2. Peter Rowland, 2003. "Exchange Rate Pass-Through To Domestic Prices: The Case Of Colombia," Borradores de Economia 2683, Banco de la Republica.
    3. Igor Velickovski & Geoffrey Thomas Pugh, 2011. "Constraints on exchange rate flexibility in transition economies: a meta-regression analysis of exchange rate pass-through," Applied Economics, Taylor & Francis Journals, vol. 43(27), pages 4111-4125.
    4. Peter Rowland, 2003. "Exchange Rate Pass-Throught to Domestic Prices: The Case of Colombia," Borradores de Economia 254, Banco de la Republica de Colombia.

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