Exchange Rate Pass-through to CPI and Inflation in Caucasian Countries: Measuring effect of Exchange rate on CPI inflation by using VAR method - Softcover

Grigolava, Grigol

Softcover

ISBN 10: 3848430819 ISBN 13: 9783848430819

Publisher: LAP LAMBERT Academic Publishing, 2012

Synopsis

Objective of this study is to analyze exchange rate pass-through in transitional, Caucasian countries. To perform proper analysis several equations must be estimated simultaneously, which nominates Vector Auto Regression as the best method for this study. Illustration of impulse response functions and variance decomposition show us degree of pass-through and share of variation in consumer prices explained by changes in exchange rate. Despite data limitation this research provides meaningful results. Caucasian countries have many similarities but each reveals its own uniqueness. Pass-through is relatively higher in Georgia and Armenia and very low in Azerbaijan. This is consistent with previous literature that countries with higher share of import have higher pass-through. Vector Error Correction model shows that the lowest deviation from long-term equilibrium is in Armenia, which probably is due to inflation targeting strategy. Variance decomposition shows significant share of exchange rates in explaining changes in CPI only in Georgia, which should suggest Georgian monetary authority to observe changes in exchange rate more carefully than other Caucasian countries.

About this title

About the Author

Mr. Grigol Grigolava has obtained his MA degree in economics in 2009. Since then he works at Monetary Policy division of The National Bank of Georgia. He mainly focuses on debt sustainability issues, participates in research of exchange rate movements and effect on Georgia's economy.

Edition details

• Publisher: LAP LAMBERT Academic Publishing
• Publication date: 2012
• Language: English
• ISBN 10: 3848430819
• ISBN 13: 9783848430819
• Binding: Paperback
• Number of pages: 56