Exchange rate pass-through in developing and emerging markets: a survey of conceptual, methodological and policy issues, and selected empirical findings

Aron, J., MacDonald, R. and Muellbauer, J. (2014) Exchange rate pass-through in developing and emerging markets: a survey of conceptual, methodological and policy issues, and selected empirical findings. Journal of Development Studies, 50(1), pp. 101-143. (doi:10.1080/00220388.2013.847180)

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Abstract

Global integration has increased the international linkages of financial markets for emerging market countries. A key channel for the international transmission of inflation and economic cycles is from exchange rate movements to domestic prices, known as exchange rate pass-through (ERPT). This article reviews the conceptual, methodological and policy issues connected with ERPT in emerging market and developing countries, and critically surveys selected empirical studies. A key contribution is to categorise and compare the heterogeneous methodologies used to extract ERPT measures in the empirical literature. Single equation models and systems methods are contrasted; frequent misspecifications that produce unreliable ERPT estimates are highlighted. The discerning policy-maker needs to ascertain by which methods ERPT measures were calculated, the controls and restrictions applied, and the time frame and stability of the estimates.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:MacDonald, Professor Ronald
Authors: Aron, J., MacDonald, R., and Muellbauer, J.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Journal of Development Studies
ISSN:0022-0388
ISSN (Online):1743-9140

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