Jayaraman, T. K. and Choong, Chee-Keong (2011): Impact of exchange rate changes on domestic inflation: a study of a small Pacific Island economy.
Download (137kB) | Preview
This paper investigates the effect of changes in exchange rate on consumer price level, in Fiji, known as exchange rate pass-through during a thirty year period (1982-2009). Specifically, three time periods are focused on: the pre-coup years (1982-1986); post coup years (1987-2009); and full time period (1982-2009). Monthly data on consumer price index, nominal exchange rate, monetary aggregate and interest rate are utilized. The study results show that the degree of exchange rate pass-through to domestic price was relatively low during the entire sample period at 0.183. It was 0.453 and 0.373 for the pre and post coups periods. Regardless of the sample periods under study, the monetary aggregate, as a variable plays a pivotal in stabilizing the price level.
|Item Type:||MPRA Paper|
|Original Title:||Impact of exchange rate changes on domestic inflation: a study of a small Pacific Island economy|
|English Title:||Impact of Exchange Rate Changes on Domestic Inflation: A Study of a Small Pacific Island Economy|
|Keywords:||Exchange rate pass-through, price, monetary measure, cointegration, Granger causality|
|Subjects:||E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation
F - International Economics > F3 - International Finance > F31 - Foreign Exchange
|Depositing User:||Chee-Keong Choong|
|Date Deposited:||26. Sep 2011 01:55|
|Last Modified:||15. Feb 2013 14:03|
Anderson, B. (2003). “Extra-Euro Area Manufacturing Import Prices and Exchange Rate Pass-Through,” European Central Bank Working Paper No. 219.
Ali, A. and T.K. Jayaraman (2002). “Fiscal and Monetary Policy Coordination in Fiji”, Economics Department Working Paper 2001-01, 1999-02, Suva: Reserve Bank of Fiji.
Bernanke, B.S. and I. Mihov (1997). “What does the Bundesbank Target?” European Economic Review, 41, (4): 1025-1053.
Engel, C. (2001). The Responsiveness of Consumer Prices to Exchange Rates and the Implications for Exchange Rate Policy, Washington: National Bureau of Economic Research.
Gagnon, J. and J. Ihrig. (2002). “Monetary Policy and Exchange Rate Pass-Through.” Board of Governors of the Federal Reserve System, International Finance Discussion Paper No. 704.
Ghosh, A. and R. S. Rajan (2007). “A Survey of Excahange Rate Pass-Through in Asia”, Asian Pacific Economic Literature, 21 (2): 13-28.
Goldberg, P.K. and M. M. Knetter (1997). “Goods Prices and Exchange Rates: What have we learned”, Journal of Economic Literature, 35(3): 1243-1272.
International Monetary Fund (2010). International Financial Statistics CD Rom April 2010, Washington, D.C.: International Monetary Fund
International Monetary Fund (2011). Public Information Notice (PIN) No. 11/35 at the on the Conclusion of Article IV discussion by the Executive Board, March 14, 2011, Washington, D.C.: International Monetary Fund.
Kahn, G.A. (1987). “Dollar Depreciation and Inflation”, Federal Reserve Bank of Kansas City Economic Review, 72 (9): 342-349.
Kim, K.H. (1998). “US Inflation and the Dollar Exchange Rate: A Vector Error Correction Model”, Applied Economics, 30 (5), 613-619
McCarthy, J. (2000). “Pass through of Exchange Rates and Import Prices to Domestic Inflation in Some Industrialized Countries, Staff Papers: No. 111, New York: Federal Reserve Bank of New York,
McFarlane, L. (2006). “Consumer Price Inflation and Exchange Rate-Pass Through in Jamaica, in A. and D. Seerattan, (eds.) Finance and Real Development, St. Augustine Trinidad: Caribbean Centre for Monetary Studies, 370-399.
Menon, J. (1995). “Exchange Rate Pass through”, Journal Economic Surveys 9 (2): 197-231.
Morling, S., S. Hussein and E. Dewan (1999). Modelling Inflation Processes”, Economics Department Working Paper 1999-02, Suva: Reserve Bank of Fiji.
ParsIey, D.C. and H.A. Popper (1998). “Exchange Rates, Domestic Prices, and Central Bank Actions: recent U.S. Experiences,” Southern Economic Journal, 64 (4): 957-972.
Phillips, R.W. (1988). “The Pass-Through of Exchange Rate Changes in Prices of Imported Manufactures”, Discussion Paper, Australian National University: Center of Economic Policy Research.
Piggot, C. and V. Reinhart (1985). “The Strong Dollar and US Inflation”, Federal Reserve Bank of New York Quarterly Review, 10 (1): 23-29
Reserve Bank of Fiji (2009). Quarterly Review December 2009, Suva: Reserve Bank of Fiji.
United Nations Economic and Social Commission (UN ESCAP) (2009). Economic and Social Survey 2010, Bangkok: UN ESCAP.
United Nations Economic and Social Commission (UN ESCAP) (2010), Economic and Social Survey 2010, Bangkok: UN ESCAP.