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A note on exchange rate pass-through in CIS countries

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  • Korhonen, Iikka
  • Wachtel, Paul

Abstract

We assess the extent and speed of exchange rate pass-through in the countries of the Commonwealth of Independent States (CIS).We do this in the framework of vector autoregressive regressions, utilising impulse functions and variance decompositions with monthly data that starts in 1999 in order to avoid periods of very high inflation and the Russian crisis.We find that exchange rate movements have a clear impact on price developments in the CIS countries.The speed of the pass-through is also fairly high: in most cases the full effect is transmitted into domestic prices in less than 12 months.Unlike in many other emerging market economies, an additional effect from US prices on to domestic prices is not significant.The extent of the exchange rate pass-through is usually much higher than in our benchmark group of emerging market countries.Variance decomposition shows that the relative share of exchange rates in explaining changes in domestic prices is higher in the CIS countries than in the benchmark group. Our results indicate that policy-makers in the CIS countries need to pay more attention to exchange rate movements than in many other emerging market countries.
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  • Korhonen, Iikka & Wachtel, Paul, 2006. "A note on exchange rate pass-through in CIS countries," Research in International Business and Finance, Elsevier, vol. 20(2), pages 215-226, June.
  • Handle: RePEc:eee:riibaf:v:20:y:2006:i:2:p:215-226
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    1. Jeffrey Frankel & David Parsley & Shang-Jin Wei, 2012. "Slow Pass-through Around the World: A New Import for Developing Countries?," Open Economies Review, Springer, vol. 23(2), pages 213-251, April.
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    Cited by:

    1. Yulia Vymyatnina, 2005. "Monetary Policy Transmission and Bank of Russia Monetary Policy," EUSP Department of Economics Working Paper Series 2005/02, European University at St. Petersburg, Department of Economics, revised Nov 2005.
    2. Ha, Jongrim & Marc Stocker, M. & Yilmazkuday, Hakan, 2020. "Inflation and exchange rate pass-through," Journal of International Money and Finance, Elsevier, vol. 105(C).
    3. Oxana Babecká-Kucharèuková, 2009. "Transmission of Exchange Rate Shocks into Domestic Inflation: The Case of the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(2), pages 137-152, June.
    4. Dabrowski, Marek, 2013. "Monetary policy regimes in CIS economies and their ability to provide price and financial stability," BOFIT Discussion Papers 8/2013, Bank of Finland Institute for Emerging Economies (BOFIT).
    5. Christian Dreger & Jarko Fidrmuc, 2009. "Drivers of Exchange Rate Dynamics in Selected CIS Countries: Evidence from a FAVAR Analysis," Discussion Papers of DIW Berlin 867, DIW Berlin, German Institute for Economic Research.
    6. Mohsen Bahmani-Oskooee & Ali Kutan, 2009. "The J-curve in the emerging economies of Eastern Europe," Applied Economics, Taylor & Francis Journals, vol. 41(20), pages 2523-2532.
    7. Levent, Korap, 2007. "Impact of Exchange Rate Changes on Domestic Inflation: he Turkish Experience," MPRA Paper 19589, University Library of Munich, Germany.
    8. Viktar Dudzich, 2022. "Real Exchange Rate Misalignments and Currency Crises in the Former Soviet Union Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 64(3), pages 384-416, September.
    9. Oleksandr Faryna, 2016. "Nonlinear Exchange Rate Pass-Through to Domestic Prices in Ukraine," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 236, pages 30-42, June.
    10. Aleem, Abdul & Lahiani, Amine, 2014. "A threshold vector autoregression model of exchange rate pass-through in Mexico," Research in International Business and Finance, Elsevier, vol. 30(C), pages 24-33.
    11. Gizem BAS & Mehmet KARA, 2020. "Exchange Rate Pass-Through on the Domestic Prices: Evidence from the Turkish Economy," Isletme ve Iktisat Calismalari Dergisi, Econjournals, vol. 8(2), pages 115-125.
    12. Nermin Yasar, 2021. "The Causal Relationship Between Foreign Debt and Economic Growth: Evidence from Commonwealth Independent States," Foreign Trade Review, , vol. 56(4), pages 415-429, November.
    13. Comunale, Mariarosaria & Simola, Heli, 2018. "The pass-through to consumer prices in CIS economies: The role of exchange rates, commodities and other common factors," Research in International Business and Finance, Elsevier, vol. 44(C), pages 186-217.
    14. International Monetary Fund, 2015. "Republic of Belarus: Selected Issues," IMF Staff Country Reports 2015/137, International Monetary Fund.
    15. Mohsen Bahmani-Oskooee & Ali Kutan, 2008. "Are devaluations contractionary in emerging economies of Eastern Europe?," Economic Change and Restructuring, Springer, vol. 41(1), pages 61-74, March.
    16. Umit Bulut, 2023. "Measuring the impacts of monetary policy in Turkey: an extended structural vector autoregressive model with structural breaks," International Journal of Economic Policy Studies, Springer, vol. 17(1), pages 117-132, February.
    17. Levent, Korap, 2007. "Impact of Exchange Rate Changes on Domestic Inflation: he Turkish Experience," MPRA Paper 19589, University Library of Munich, Germany.
    18. Jovanovic, Branimir & Petreski, Marjan, 2014. "Monetary policy, exchange rates and labor unions in SEE and the CIS during the financial crisis," Economic Systems, Elsevier, vol. 38(3), pages 309-332.
    19. Comunale, Mariarosaria & Simola, Heli, 2018. "The pass-through to consumer prices in CIS economies: The role of exchange rates, commodities and other common factors," Research in International Business and Finance, Elsevier, vol. 44(C), pages 186-217.
    20. Krapl, Alain & Salyer, Robert, 2017. "The effects of fair value reporting on corporate foreign exchange exposures," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 215-238.
    21. Omer Fazil Emek & Faruk Dusunceli & Omer Doru, 2021. "Investigation of the Exchange Rate Pass-through Effect on Domestic Producer and Consumer Prices in Turkey," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 71(1), pages 163-190, June.
    22. Yulia Vymyatnina, 2005. "Monetary Policy Transmission and Bank of Russia Monetary Policy," EUSP Department of Economics Working Paper Series Ec-02/05, European University at St. Petersburg, Department of Economics, revised Nov 2005.
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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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