Traspaso de tipo de cambio a precios y relación con la credibilidad de la política monetaria

This paper focuses on the effects of monetary policy design and credibility on exchange rate pass-through. In order to do that, we estimate conditional pass-through coefficients on the most relevant shocks in explaining exchange rate variation in Uruguay from 2005 to 2017. The analysis is framed in a general equilibrium model, which is estimated in the present work through Bayesian techniques. The conditional pass-through is then estimated through the impulse response functions from the model. As in previous studies we find that the conditional pass-through varies greatly between different types of shocks in the case of Uruguay. Pass-through is bigger when international financial shocks or unanticipated monetary disturbances that affect the economy occur than to the one observed after international price shocks. This paper shows that the credibility of monetary policy is a key factor to explain the size of the pass-through coefficient: increasing the deviation of inflation expectations by 1% doubles the size of the pass-through coefficient when inflation expectations are not aligned with the inflation target. The paper also shows a second-order effect of changes in the weights in the monetary policy rule on the size of pass through.