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Exchange rate pass-through to domestic prices in Tunisia: a short- and long-run analysis

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  • Kamel Helali
  • Maha Kalai

Abstract

This study analyses the impact of the exchange rate fluctuations in the short and long-run in Tunisia under a pure commitment policy through two channels. The first is the structural vector autoregression (SVAR) used to analyse the short run effects of the exchange rate on the industrial production index and on the consumer and import price indexes. The second is the vector error correction model (VECM) used to examine the long-run dynamic effects of the exchange rate upon the same variables relying on Tunisian monthly data during the period from January 1993 to June 2011. Unlike several empirical studies, the exchange rate is found to be a potential source not only of production but also of inflation reduction in Tunisia. Indeed, the direct channel of the exchange rate seems to have a significant impact on production and inflation in the long-run, whereas the indirect one has no effect on the money supply.

Suggested Citation

  • Kamel Helali & Maha Kalai, 2015. "Exchange rate pass-through to domestic prices in Tunisia: a short- and long-run analysis," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 8(3), pages 282-301.
    • Handle: RePEc:ids:ijmefi:v:8:y:2015:i:3:p:282-301
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    Cited by:

    1. Pınar GÖKTAŞ, 2019. "Asymmetric Transition Effects of the Exchange Rate on Consumer Prices in Turkey," Sosyoekonomi Journal, Sosyoekonomi Society, issue 27(42).
    2. Dahem, Ahlem & Siala Guermazi, Fatma, 2016. "Exchange rate Pass-through and Monetary Policy in Transition Economy: Evidence from Tunisia with disaggregated VAR Analysis," MPRA Paper 74179, University Library of Munich, Germany.
    3. Mohamed Ilyes Gritli, 2021. "Price inflation and exchange rate pass‐through in Tunisia," African Development Review, African Development Bank, vol. 33(4), pages 715-728, December.
    4. Kashif MUNIR, 2022. "Linear and nonlinear effect of exchange rate on inflation in Pakistan," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(631), S), pages 165-174, Summer.
    5. 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.
    6. Hamdi Becha & Maha Kalai & Kamel Helali, 2023. "Smooth transition regression model relating inflation to economic growth in Tunisia," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 12(1), pages 1-26, December.
    7. Mohamed Ali Chroufa & Nouri Chtourou, 2023. "Asymmetric relationship between exchange rate and inflation in Tunisia: fresh evidence from multiple-threshold NARDL model and Granger quantile causality," SN Business & Economics, Springer, vol. 3(7), pages 1-21, July.
    8. Ibrahim Abdulhamid Danlami, 2020. "Revisiting the West African Commonwealth Countries’ Exchange Rate Pass-Through to Inflation," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 6(1), pages 70-77, March.
    9. Riadh Trabelsi, 2024. "Sources of macroeconomic fluctuations in Tunisia: a structural VAR approach," SN Business & Economics, Springer, vol. 4(10), pages 1-28, October.

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    More about this item

    Keywords

    exchange rate pass-through; domestic prices; short-run analysis; long-run analysis; Tunisia; exchange rates; exchange rate fluctuations; structural VAR; vector autoregression; SVAR; vector error correction model; VECM; production; inflation reduction; money supply.;
    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
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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