Working Paper: NBER ID: w13889
Authors: Frederic S. Mishkin
Abstract: This paper discusses what recent economic research tells us about exchange rate pass-through and what this suggests for the control of monetary policy. It first focuses on exchange rate pass-through from a macroeconomic perspective and then examines the microeconomic evidence. In light of this evidence, it then discusses the implications of exchange rate movements on the conduct of monetary policy.
Keywords: exchange rate; passthrough; monetary policy; inflation
JEL Codes: E52; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher inflation (E31) | Increased import prices (F14) |
| Stable monetary policies (E63) | Low passthrough from exchange rates to consumer prices (F31) |
| Exchange rate fluctuations (F31) | Inflation (E31) |
| Nominal exchange rate depreciation (F31) | Higher inflation (E31) |
| Exchange rate depreciation (F31) | Low passthrough to consumer prices (E31) |