Abstract

http://ssrn.com/abstract=880916
 
 

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Explaining the Exchange Rate Pass-Through in Different Prices


Ehsan U. Choudhri


Carleton University - Department of Economics

Hamid Faruqee


International Monetary Fund (IMF) - Research Department

Dalia Hakura


International Monetary Fund (IMF)

December 2002

IMF Working Paper No. 02/224

Abstract:     
This paper examines the performance of different new open economy macroeconomic models in explaining the exchange rate pass-through in a wide range of prices. Quantitative versions of different models are used to derive the dynamic response of various prices to an exchange rate shock. Predicted responses are compared with the evidence based on VAR models to examine how well different models fit the data. The results show that the best-fitting model incorporates a number of features highlighted by different strands of the literature: sticky prices, sticky wages, distribution costs, and a combination of local and producer currency pricing.

Number of Pages in PDF File: 33

Keywords: Exchange rate pass-through, Prices, New open economy macroeconomic models

JEL Classification: E31, F41

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Date posted: February 14, 2006  

Suggested Citation

Choudhri, Ehsan U. and Faruqee, Hamid and Hakura, Dalia, Explaining the Exchange Rate Pass-Through in Different Prices (December 2002). IMF Working Paper, Vol. , pp. 1-33, 2002. Available at SSRN: http://ssrn.com/abstract=880916

Contact Information

Ehsan U. Choudhri (Contact Author)
Carleton University - Department of Economics ( email )
1125 Colonel By Drive
Ottawa, Ontario
Canada
Hamid Faruqee
International Monetary Fund (IMF) - Research Department ( email )
700 19th Street NW
Washington, DC 20431
United States
Dalia Hakura
International Monetary Fund (IMF) ( email )
700 19th Street NW
Washington, DC 20431
United States
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