Monetary Policy Credibility and Exchange Rate Pass-Through

2016/12/01 by Yan Carrière‐Swallow, Yan Carriere-Swallow, Bertrand Gruss +4 · 1 citation
Economics, Econometrics and Finance · #Global Financial Crisis and Policies #Market Dynamics and Volatility #Monetary Policy and Economic Impact

paper · pdf · doi:10.5089/9781475560312.001

openalex publication_date 2016/12/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/30

Abstract

A long-standing conjecture in macroeconomics is that recent declines in exchange rate pass-through are in part due to improved monetary policy performance. In a large sample of emerging and advanced economies, we find evidence of a strong link between exchange rate pass-through to consumer prices and the monetary policy regime’s performance in delivering price stability. Using input-output tables, we decompose exchange rate pass-through to consumer prices into a component that reflects the adjustment of imported goods at the border, and another that captures the response of all other prices. We find that price stability and central bank credibility have reduced the second component.

Citations

• Low inflation, pass-through, and the pricing power of firms
• Measuring the Independence of Central Banks and Its Effect on Policy Outcomes
• Estimation and Inference of Impulse Responses by Local Projections

Cited by

• Central Bank Independence and Inflation in Latin America—Through the Lens of History

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