The shocks matter : improving our estimates of exchange rate pass-through

  • K. Forbes, Ida Hjortsoe, Tsvetelina Nenova
  • Published 2015

Abstract

A major challenge for monetary policy has been predicting how exchange rate movements will impact inflation. We propose a new focus: incorporating the underlying shocks that cause exchange rate fluctuations when evaluating how these fluctuations ‘pass through’ into import and consumer prices. We show that in a standard open-economy model the relationship… (More)

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