Volume : 3, Issue : 4, April - 2014

Exchange Rate Pass–Through as a Commitment Device under Inflation Targeting in Emerging Market

Necibi Thameur, Olfa Manai Daboussi

Abstract :

This paper investigates the exchange rates pass–through into inflation in a sample of 10 emerging market adopting inflation targeting by the end of 2007. Our study examines the short–run and the long–run fluctuation of the exchange rates pass–through into inflation over the period from 1990:Q1–2012:Q4. Our estimations confirm that these countries experienced a low inflation and the exchange rate pass–through fall during the 1990s induced by a shift in their monetary policy. In all countries, the results show that the long–run exchange rate pass–through (ERPT) is higher than the short–run (ERPT). Moreover, we show that most differences in (ERPT) into prices are due to inflation targeting regime.