An Empirical Assessment of the Exchange Rate Pass-through in Mozambique

By Ari Aisen, Edson Manguinhane, Felix F. Simione

May 6, 2021

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Format: Chicago

Ari Aisen, Edson Manguinhane, and Felix F. Simione An Empirical Assessment of the Exchange Rate Pass-through in Mozambique, (USA: International Monetary Fund, 2021) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Determining the magnitude and speed of the exchange rate passthrough (ERPT) to inflation has been of paramount importance for policy-makers in developed and emerging economies. This paper estimates the exchange rate passthrough in Mozambique using econometric techniques on a sample spanning from 2001 to 2019. Results suggest that the ERPT is assymetric, sizable and fast, with 50 percent of the exchange rate variations passing through to prices in less than six months. Policy-makers should continue to pursue low and stable inflation and develop a strong track record of prudent macroeconomic policies for the ERPT to decline.

Subject: Exchange rate pass-through, Exchange rates, Foreign exchange, Inflation, Monetary policy, Monetary policy frameworks, Nominal effective exchange rate, Prices

Keywords: Africa, CPI response, Exchange rate pass-through, Exchange rates, Global, Inflation, Inflation environment, Long-run ERPT elasticity, Monetary policy frameworks, Nominal effective exchange rate, Philips-perron unit root test, Speed of the exchange rate passthrough, Sub-Saharan Africa

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/132
Stock No:

WPIEA2021132
ISBN:

9781513573694
ISSN:

1018-5941

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