Exchange Rate Pass-Through in Turkey

19 Pages Posted: 14 Feb 2006

See all articles by Daniel Leigh

Daniel Leigh

Johns Hopkins University

Marco Rossi

International Monetary Fund (IMF)

Date Written: November 2002

Abstract

In light of the strong correlation between exchange rate movements and domestic prices in Turkey, it is important to assess the impact of the exchange rate on domestic prices, in particular as Turkey moves to an inflation targeting regime. This paper uses a recursive vector autoregression model to investigate the impact of exchange rate movements on prices in Turkey. We find that (i) the impact of the exchange rate on prices is over after about a year, but is mostly felt in the first four months, (ii) the pass-through to wholesale prices is more pronounced compared to the pass-through to consumer prices, and (iii) the estimated pass-through is complete in a shorter time and is larger than that estimated for other key emerging market countries.

Keywords: Exchange rate pass-through, inflation, inflation targeting, distribution chain, VAR, Turkey

JEL Classification: C32, E31, E37, F31, O52

Suggested Citation

Leigh, Daniel and Rossi, Marco, Exchange Rate Pass-Through in Turkey (November 2002). IMF Working Paper No. 02/204, Available at SSRN: https://ssrn.com/abstract=880852

Daniel Leigh (Contact Author)

Johns Hopkins University

Baltimore, MD 21218
United States

Marco Rossi

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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