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Exchange Rate Pass-through and Monetary Policy in Transition Economy: Evidence from Tunisia with a Disaggregated VAR Analysis

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  • Ahlem Dahem1
  • Fatma Siala Guermazi

Abstract

Relying on monthly and quarterly data, from 2000 to 2015, this paper keeps up with SVAR modeling and price chain study, through a disaggregate approach that aims at analyzing the exchange rate pass-through (ERPT) on the various components of consumer price index (CPI). To our knowledge, this study is the first attempt at ERPT estimation through a disaggregate approach for the CPI. The results show that the total ERPT is about 20%. Specifically, 10% of PT on the administered prices after 2011 revolution date (6% of PT for food administered prices and 7% of PT for energy prices), which contradicts the prevailing theory that admits the inexistence of PT for administered prices. Our findings confirm the importance of a disaggregate analysis for studying ERPT to contain inflation.

Suggested Citation

  • Ahlem Dahem1 & Fatma Siala Guermazi, 2016. "Exchange Rate Pass-through and Monetary Policy in Transition Economy: Evidence from Tunisia with a Disaggregated VAR Analysis," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(4), pages 50-63.
    • Handle: RePEc:ers:ijebaa:v:iv:y:2016:i:4:p:50-63
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    More about this item

    Keywords

    Exchange Rate Pass-through – Monetary policy – Emerging Market – Disaggregated analysis JEL Classification: C32; E31; E42; E52; F31; F41; O55;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • 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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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