Working Paper Series no. 213: Revisiting the Decline in the Exchange Rate Pass-Through: Further Evidence from Developing Countries.

Abstract

The main purpose of the paper is to contribute to the empirical works relating to exchange rate pass-through. Indeed, we revisit the Taylor (2000) proposition for some developing countries in order to examine the decline in their pass-through coefficients, and to find possible explanations for this. To that effect, we adopt an empirical methodology based on some structural breaks and cointegration tests proposed respectively by Bai and Perron (1998), and Gregory and Hansen (1996). Our work is motivated by the fact that during the 1990s, some developing countries shifted their monetary policy in order to reduce the inflation.

Karim Barhoumi and Jamel Jouini
July 2008

Classification JEL : C20, F21, F30.

Keywords : Exchange rate pass-through, developing countries, structural changes, cointegration tests