TY - JOUR
T1 - Exchange rate pass-through and inflation targeting in Peru
AU - Winkelried, Diego
PY - 2014/1/1
Y1 - 2014/1/1
N2 - 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.
AB - 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.
KW - Exchange rate pass-through
KW - Inflation targeting
KW - Structural VAR
KW - Exchange rate pass-through
KW - Inflation targeting
KW - Structural VAR
UR - https://www.scopus.com/inward/record.uri?partnerID=HzOxMe3b&scp=84899958364&origin=inward
UR - https://www.scopus.com/inward/citedby.uri?partnerID=HzOxMe3b&scp=84899958364&origin=inward
U2 - 10.1007/s00181-013-0715-4
DO - 10.1007/s00181-013-0715-4
M3 - Article in a journal
SN - 0377-7332
VL - 46
SP - 1181
EP - 1196
JO - Empirical Economics
JF - Empirical Economics
IS - 4
ER -