
Exchange rate pass-through patterns are changing – RBI paper
Pass-through in emerging markets is non-linear, asymmetric and falling, the authors find

The extent to which exchange rate fluctuations pass through to prices in emerging markets has changed since the financial crisis, research published by the Reserve Bank of India finds.
Authors Michael Debabrata Patra, Jeevan Kumar Khundrakpam and Joice John draw together several strands of literature on pass-through, which they note has “gained depth and sophistication” in recent years.
They assess the degree of pass-through for 17 “systemic” emerging market economies since 2005, accounting for heterogeneity and attempting to control for misspecifications.
Pass-through is found to have declined in the post-crisis period, to a range of 9–15%, on the low side relative to much of the rest of the literature.
The authors also report asymmetry and non-linearity in the data. Depreciations have a “significantly larger” pass-through to prices than appreciations.
Furthermore, the authors say, net exporters pass through depreciations faster and more completely.
This article first appeared on sister website Central Banking.
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