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Exchange Rate Pass-through after a Large Depreciation

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  • Anatoli Colicev
  • Joris Hoste
  • Jozef Konings

Abstract

This paper uses monthly scanner consumer price data to study exchange rate pass-through (ERPT) after the Kazakh Tenge switched from a fixed to a floating exchange rate regime in August 2015. The depreciation of the Tenge was large (50%), triggered overnight and unanticipated. This exchange rate shock allows us to have a clear identification strategy. In particular, we model ERPT to consumer prices using Local Projections estimations, which is especially well-suited to capture price dynamics after large shocks. We find that prices respond fast, yet incomplete. After 12 months the ERPT into consumer prices is between 25% and 34%. We also find that ERPT depends on the type of product, i.e. whether it is foreign sourced and whether the product is part of an international brand.

Suggested Citation

  • Anatoli Colicev & Joris Hoste & Jozef Konings, 2019. "Exchange Rate Pass-through after a Large Depreciation," Working Papers 201902, University of Liverpool, Department of Economics.
    • Handle: RePEc:liv:livedp:201902
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    1. Cristina ANGHELESCU, 2022. "Shock-dependent Exchange Rate Pass-through into Different Measures of Price Indices in the Case of Romania," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 88-104, October.

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