Exchange rate pass-through and price indexes: An analysis for the Brazilian economy (1999-2011)
DOI:
https://doi.org/10.4013/pe.2013.91.03Abstract
This work investigates the relationship between changes in price indexes and changes in the exchange rate by analyzing the effect of the exchange rate pass-through. For this purpose, we used variables from January 1999 to December 2011, aiming to capture the beginning of the change of exchange rate regime in the Brazilian economy, and thus, we estimated a Vector Auto-Regression (VAR) inferring the impulse response, the decomposition of variance, and the Granger causality test. Furthermore, we examined the long and short-term elasticities of the effect of the exchange rate pass-through by means of the Auto-Regressive Model with Distributed Lags (ARDL). Based on these results, we believe that the exchange rate pass-through affects more strongly wholesale prices than domestic prices, while the former have a higher short and longrun sensitivity in relation to exchange rate changes.
Key words: exchange pass-through, price index, Vector Auto-Regression.
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