Exchange rate pass-through and inflation targeting in Peru

Research output: Contribution to journalArticle in a journalpeer-review

7 Scopus citations

Abstract

It has been widely documented that the exchange rate pass-through to domestic inflation has decreased significantly in most of the industrialized world. As microeconomic factors cannot completely explain such a widespread phenomenon, a macroeconomic explanation linked to the inflationary environment-that a low and more stable inflation rate leads to a decrease in the pass-through-has gained popularity. Using a structural VAR framework, this paper presents evidence of a similar decline in the pass-through in Peru, a small open economy that gradually reduced inflation to international levels in order to adopt a fully fledged inflation targeting scheme in 2002. It is argued that the establishment of a credible regime of low inflation has been instrumental in driving the exchange rate pass-through down.
Original languageEnglish
Pages (from-to)1181-1196
Number of pages16
JournalEmpirical Economics
Volume46
Issue number4
DOIs
StatePublished - 1 Jan 2014
Externally publishedYes

Keywords

  • Exchange rate pass-through
  • Inflation targeting
  • Structural VAR

Fingerprint

Dive into the research topics of 'Exchange rate pass-through and inflation targeting in Peru'. Together they form a unique fingerprint.

Cite this