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State-Dependent Exchange Rate Pass-Through

Author

Listed:
  • Mr. Yan Carriere-Swallow
  • Melih Firat
  • Davide Furceri
  • Daniel Jimenez

Abstract

We estimate how the rate of pass-through from the exchange rate to domestic prices varies across states of the economy and depending on the shocks that drive fluctuations in the exchange rate. We confirm several results from the literature and uncover new facts. Drawing on the experience of a large sample of advanced and emerging market economies over the past 30 years, we document that exchange rate pass-through significantly larger during periods of high inflation and elevated uncertainty. Using a novel identification strategy, we also show that pass-through is higher when exchange rate fluctuations are driven by U.S. monetary policy.

Suggested Citation

  • Mr. Yan Carriere-Swallow & Melih Firat & Davide Furceri & Daniel Jimenez, 2023. "State-Dependent Exchange Rate Pass-Through," IMF Working Papers 2023/086, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2023/086
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    References listed on IDEAS

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    1. Kwon, Janghan & Shin, Woongjae, 2023. "Nonlinear exchange rate pass-through and monetary policy credibility: Evidence from Korea," Economics Letters, Elsevier, vol. 230(C).

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    More about this item

    Keywords

    Exchange rate; pass-through; inflation; state-dependence; inflation uncertainty; pass-through from the exchange rate; rate pass-through; pass-through coefficient; rate of pass-through; Exchange rate pass-through; Exchange rates; Exchange rate adjustments; Exchange rate arrangements; Global;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • 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
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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