Exchange rate pass-through and inflation targets in Chile

Using quarterly data on the Chilean economy from 1986 to 2009, this article looks at the effect of gradual implementation of an inflation-targeting regime on exchange rate pass-through to prices. Initially, the introduction of inflation-targeting contributes to substantial reductions in the pass-thr...

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Detalles Bibliográficos
Autores Principales: Mujica, Patricio, Saens, Rodrigo
Formato: Otro (Other)
Lenguaje:Inglés (English)
Publicado: 2016
Materias:
Acceso en línea:http://hdl.handle.net/11362/40068
Descripción
Sumario:Using quarterly data on the Chilean economy from 1986 to 2009, this article looks at the effect of gradual implementation of an inflation-targeting regime on exchange rate pass-through to prices. Initially, the introduction of inflation-targeting contributes to substantial reductions in the pass-through coefficient. However, in the second phase of implementation, once the monetary authority extends the policy horizon and introduces greater flexibility into the exchange rate system, the pass-through coefficient rises sharply. The findings of this study show that exchange rate pass-through to prices, in addition to being sensitive to the inflationary environment, is closely tied to the rules of the game that shape the monetary policy framework.