Today the Reserve Bank of India placed on its website a Working Paper titled “Exchange Rate Pass-through in Emerging Economies” under the Reserve Bank of India Working Paper Series*. The Paper is co-authored by Michael Debabrata Patra, Jeevan Kumar Khundrakpam and Joice John. This paper provides estimates of exchange rate pass through (ERPT) to consumer inflation for a panel of 17 emerging market economies (EMEs), after controlling for long-run dynamics of domestic prices and external cost variables; potential endogeneity of the exchange rate; non-linearity and heterogeneity. These estimates are useful guideposts for monetary policy authorities in emerging economies to condition their responses to exogenous price shocks that are transmitted to domestic inflation through imported prices. This paper also finds that ERPT in EMEs is asymmetric – larger for depreciation than for appreciation and non-linear – size does matter, even as exchange rate pass through to domestic inflation has been declining for these countries in the years following the global financial crisis. Ajit Prasad Director Press Release : 2019-2020/1593 | |