Exchange Rate Pass-Through, Monetary Policy, and Real Exchange Rates: Iceland and the 2008 Crisis
We use detailed data for Iceland to examine two often-neglected aspects of the exchange rate pass-through problem. First, we investigate whether the pass-through coefficient varies with the degree of international tradability of goods. Second, we analyze if the pass-through coefficient depends on th...
| Published in: | Open Economies Review |
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| Main Authors: | , |
| Format: | Text |
| Language: | English |
| Published: |
Springer US
2022
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| Subjects: | |
| Online Access: | http://www.ncbi.nlm.nih.gov/pmc/articles/PMC8743165/ https://doi.org/10.1007/s11079-021-09627-5 |
| Summary: | We use detailed data for Iceland to examine two often-neglected aspects of the exchange rate pass-through problem. First, we investigate whether the pass-through coefficient varies with the degree of international tradability of goods. Second, we analyze if the pass-through coefficient depends on the monetary policy framework. We consider 12 disaggregated price indexes in Iceland for 2003–2019, a period that includes Iceland’s banking and currency crisis of 2008. We find that the pass-through declined around the time Iceland reformed its flexible inflation targeting, and that the coefficients are significantly higher for tradable than for nontradables. |
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