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Exchange rate pass-through to inflation in Mongolia

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  • Doojav, Gan-Ochir

Abstract

This paper examines the impact of exchange rates on the domestic consumer prices in Mongolia by analysing data from January 1998 to January 2008. The empirical model is a recursive VAR, suggested by McCarthy (2000). Impulse responses and variance decompositions are used to measure the exchange rate pass-through to consumer price inflation. The paper finds high pass-through of exchange rate to inflation and low persistence and volatility of the exchange rate. The major findings of this paper are: (i) the impact of exchange rate on consumer prices is over after about a year months, but is mostly felt in the 6-7 months. (ii) Exchange rate pass-through to consumer prices rises from about 10 percent in the fifth month of the shock to about 55 percent in ninth months. (iii) Exchange rate explains about 7-8 percent of the variation in consumer price inflation.

Suggested Citation

  • Doojav, Gan-Ochir, 2009. "Exchange rate pass-through to inflation in Mongolia," MPRA Paper 72140, University Library of Munich, Germany, revised Feb 2009.
    • Handle: RePEc:pra:mprapa:72140
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    References listed on IDEAS

    as
    1. Zulfiqar Hyder & Sardar Shah, 2004. "Exchange Rate Pass-Through to Domestic Prices in Pakistan," SBP Working Paper Series 05, State Bank of Pakistan, Research Department.
    2. Ms. Nombulelo Braiton, 2008. "Pass-Through of External Shocks to Inflation in Sri Lanka," IMF Working Papers 2008/078, International Monetary Fund.
    3. Peter Rowland, 2003. "Exchange Rate Pass-Throught to Domestic Prices: The Case of Colombia," Borradores de Economia 254, Banco de la Republica de Colombia.
    4. Mr. Marco Rossi & Mr. Daniel Leigh, 2002. "Exchange Rate Pass-Through in Turkey," IMF Working Papers 2002/204, International Monetary Fund.
    5. Peter Rowland, 2003. "Exchange Rate Pass-Through To Domestic Prices: The Case Of Colombia," Borradores de Economia 2683, Banco de la Republica.
    6. Mr. Ashok Bhundia, 2002. "An Empirical Investigation of Exchange Rate Pass-Through in South Africa," IMF Working Papers 2002/165, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Exchange rate pass-through; VAR; Impulse responses; Mongolia;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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