Revisiting the exchangerate pass‐through : a general equilibrium perspective

Abstract: A large literature estimates the exchange-rate pass-through to prices (ERPT) using reducedform approaches. The results from these studies are an important input at Central Banks. We study the usefulness of these empirical measures for actual monetary policy analysis and decision making,...

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Autores principales: García-Cicco, Javier, García-Schmidt, Mariana
Formato: Documento de trabajo
Lenguaje:Inglés
Publicado: Pontificia Universidad Católica Argentina. Facultad de Ciencias Económicas. Departamento de Investigación Francisco Valsecchi 2020
Materias:
POLITICA MONETARIA
FINANZAS
ECONOMIA INTERNACIONAL
COMERCIO INTERNACIONAL
MACROECONOMIA
Acceso en línea:https://repositorio.uca.edu.ar/handle/123456789/9974
Aporte de:
Repositorio Institucional de la Universidad Católica Argentina (UCA) de Universidad Católica Argentina
id I33-R139123456789-9974
record_format dspace
institution Universidad Católica Argentina
institution_str I-33
repository_str R-139
collection Repositorio Institucional de la Universidad Católica Argentina (UCA)
language Inglés
topic POLITICA MONETARIA
FINANZAS
ECONOMIA INTERNACIONAL
COMERCIO INTERNACIONAL
MACROECONOMIA
spellingShingle POLITICA MONETARIA
FINANZAS
ECONOMIA INTERNACIONAL
COMERCIO INTERNACIONAL
MACROECONOMIA
García-Cicco, Javier
García-Schmidt, Mariana
Revisiting the exchangerate pass‐through : a general equilibrium perspective
topic_facet POLITICA MONETARIA
FINANZAS
ECONOMIA INTERNACIONAL
COMERCIO INTERNACIONAL
MACROECONOMIA
description Abstract: A large literature estimates the exchange-rate pass-through to prices (ERPT) using reducedform approaches. The results from these studies are an important input at Central Banks. We study the usefulness of these empirical measures for actual monetary policy analysis and decision making, emphasizing two main shortcomings that arise naturally from a general equilibrium perspective. First, while the empirical literature computes a single ERPT measure, in a general equilibrium model the evolution of the exchange rate and prices will differ depending on the shock hitting the economy. Accordingly, we distinguish between conditional and unconditional ERPT measures, showing that they can lead to very different interpretations. Second, in a general equilibrium model the ERPT crucially depends on the expected behavior of monetary policy; although the empirical literature cannot account for this. As a result, results from this literature might provide a misleading guide for monetary policy. We highlight the quantitative relevance of these with a DSGE model of a small and open economy with sectoral distinctions, real and nominal rigidities, and a variety of driving forces; estimated using Chilean data.
format Documento de trabajo
author García-Cicco, Javier
García-Schmidt, Mariana
author_facet García-Cicco, Javier
García-Schmidt, Mariana
author_sort García-Cicco, Javier
title Revisiting the exchangerate pass‐through : a general equilibrium perspective
title_short Revisiting the exchangerate pass‐through : a general equilibrium perspective
title_full Revisiting the exchangerate pass‐through : a general equilibrium perspective
title_fullStr Revisiting the exchangerate pass‐through : a general equilibrium perspective
title_full_unstemmed Revisiting the exchangerate pass‐through : a general equilibrium perspective
title_sort revisiting the exchangerate pass‐through : a general equilibrium perspective
publisher Pontificia Universidad Católica Argentina. Facultad de Ciencias Económicas. Departamento de Investigación Francisco Valsecchi
publishDate 2020
url https://repositorio.uca.edu.ar/handle/123456789/9974
work_keys_str_mv AT garciaciccojavier revisitingtheexchangeratepassthroughageneralequilibriumperspective
AT garciaschmidtmariana revisitingtheexchangeratepassthroughageneralequilibriumperspective
bdutipo_str Repositorios
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