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A Pass‐Through Revival
Author(s) -
Shioji Etsuro
Publication year - 2014
Publication title -
asian economic policy review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.58
H-Index - 20
eISSN - 1748-3131
pISSN - 1832-8105
DOI - 10.1111/aepr.12053
Subject(s) - economics , exchange rate , exchange rate pass through , monetary policy , monetary economics , macroeconomics , international economics
It has been found that the pass‐through of the exchange rate and import prices to domestic prices has weakened over time. The most recent research, however, shows that this trend may have been reversed. Recent studies have applied various time series methods to the Japanese data, and estimated responses of domestic prices to the exchange rate and import prices in different time periods. Those studies have found signs that pass‐through has made an impressive comeback since the early 2000s. This paper reviews the most recent evidence and discusses its policy implications. I argue that the exchange rate has likely regained its status as an important transmission mechanism of monetary policy to domestic prices.