IT Countries: A Breed Apart? the case of Exchange Rate Pass-Through

Antonia López-Villavicencio (1) , Marc Pourroy (2)

1 GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne
2 Université de Poitiers - Faculté de Sciences économiques

This paper estimates the effects of two monetary policy strategies in the exchange rate pass-through (ERPT). To this end, we employ propensity score matching and consider the adoption of a target by a country as a treatment to find suitable counterfactuals to the actual targeters. By controlling for self-selection bias and endogeneity of the monetary policy regime, we show that inflation target has helped in reducing the ERPT, with older regimes more successful than younger ones. However, a de facto flexible exchange rate regime has not noticeable advantages to reduce the extent to which exchange rate fluctuations contribute to inflation instability.

Mots clés: exchange rate pass-through; inflation targeting; exchange rate regime; propensity score matching

Domaines: Economies et finances

Antonia López-Villavicencio, Marc Pourroy. IT Countries: A Breed Apart? the case of Exchange Rate Pass-Through. 2017. ⟨halshs-01614817⟩