Communication non publiée
How important and asymmetric is the exchange rate pass-through to consumer prices in the Czech republic? 4th International Conference on Applied Statistics, Bucharest, November 20-22, 2008
In this paper, we analyse empirically the exchange rate pass-through to the consumer price index (CPI) in the Czech Republic. Based on monthly data from 1998 onwards, our estimates yield the following main results. First, the exchange rate passthrough appears very low or, put differently, changes in the exchange rate are by far less than fully reflected in the CPI. Second, the exchange rate pass-through is not asymmetric, with the CPI responding in a symmetrical manner to both appreciations and depreciations. Consequently, in the run up to the European Monetary Union, the Maastricht criteria of inflation and exchange rate stability appear rather disconnected and, the effectiveness of exchange rate appreciation in lowering inflation is thus quite low. Besides this key message for policy-making, we discuss how our results are sensitive to the introduction – or not – of dummy variables to control for one-off factors (e.g. increases in regulated prices), two different specifications for our variables of interest (i.e. month-on-month changes and year-on-year changes) as well as different time spans.