Inflation Expectations and Dollarisation in Peru
15 Pages Posted: 3 Dec 2016
Date Written: November 2016
Dollarisation intensifies the challenges posed to monetary policy by the pass-through of the exchange rate to domestic prices. These challenges become even greater when real transactions are dollarised, contaminating the formation of inflation expectations. This introduces non-linearities and asymmetries into the implications of the exchange rate for inflation during larger currency depreciations, in contrast to the case of smaller depreciations and appreciations.
Full Publication: Inflation Mechanisms, Expectations and Monetary Policy
Keywords: Inflation expectations, exchange rate pass-through into prices, SVAR models
JEL Classification: E52, E58, F31
Suggested Citation: Suggested Citation