IDEAS home Printed from https://ideas.repec.org/p/aer/wpaper/4978f771-fd1d-44c2-8810-a2a064d8b5a7.html
   My bibliography  Save this paper

The Exchange Rate Pass-Through to Inflation and its Implications for Monetary Policy in Cameroon and Kenya

Author

Listed:
  • Revelli, Dongue Ndongo Patrick

Abstract

Understanding how domestic prices adjust to the exchange rate enables us to anticipate the effects on inflation and monetary policy responses. This study examines the extent of the exchange rate pass-through to the Consumer Price Index in Cameroon and Kenya over the 1991-2013 period. The results of its econometric analysis shows that the degree of the exchange rate pass-through is incomplete and varied between 0.18 and 0.58 over one year in Kenya, while it varied between 0.53 and 0.89 over the same period in Cameroon. For the long term, it was found to be equal to 1.06 in Kenya and to 0.28 in Cameroon. A structural VAR analysis using impulse-response functions supported the results for the short term but found a lower degree of passthrough for the exchange rate shocks: 0.3125 for Kenya and 0.4510 for Cameroon. It follows from these results that the exchange rate movements remain a potentially important source of inflation in the two countries. Variance decomposition shows that the contribution of the exchange rate shocks is modest in the case of Kenya but significant in that of Cameroon.

Suggested Citation

  • Revelli, Dongue Ndongo Patrick, 2020. "The Exchange Rate Pass-Through to Inflation and its Implications for Monetary Policy in Cameroon and Kenya," Working Papers 4978f771-fd1d-44c2-8810-a, African Economic Research Consortium.
    • Handle: RePEc:aer:wpaper:4978f771-fd1d-44c2-8810-a2a064d8b5a7
    Note: African Economic Research Consortium
    as

    Download full text from publisher

    File URL: https://publication.aercafricalibrary.org/handle/123456789/685
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aer:wpaper:4978f771-fd1d-44c2-8810-a2a064d8b5a7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Daniel Njiru (email available below). General contact details of provider: https://edirc.repec.org/data/aerccke.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.