Antonia Lopez-Villavicencio, GATE, Université de Lyon 2
In this paper, we estimate the exchange rate pass-through to import and consumer prices and assess its dynamics for a sample of 14 emerging countries over the 1994Q1-2015Q3 period. To this end, we augment the traditional bivariate relationship between the nominal effective exchange rate and inflation by accounting for monetary stability proxied by the inflation environment, monetary policy regime and monetary policy behavior. We show that both the level and volatility of inflation, as well as adopting an inflation target or the transparency of monetary policy decisions clearly reduce ERPT to consumer prices. However, uncertainty about domestic monetary policy does not affects the pass-through to the price of imports.