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198 result(s)
May 22, 2004

Exchange Rate Pass-Through in Industrialized Countries

Bank of Canada Review - Spring 2004 Jeannine Bailliu, Hafedh Bouakez
Economists' long-standing interest in the degree to which exchange rate movements are reflected in prices was rekindled in the 1970s by a combination of rising inflation and the adoption of more flexible exchange rate regimes in many industrialized countries. Specifically, there were concerns that a large currency depreciation could degenerate into an inflationary spiral. Such fears were curtailed in the 1980s and early 1990s as industrialized countries began to reduce and stabilize their inflation rates. The low-inflation period most industrialized countries entered approximately a decade ago coincided with significant exchange rate depreciations that had much smaller effects on consumer prices than expected. This led to a belief that the extent to which exchange rate movements are passed through to consumer prices has declined. In this article, the authors examine why pass-through could be incomplete and review empirical estimates to determine whether pass-through has indeed declined, suggesting possible reasons for this decline and discussing the implications for monetary policy.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Exchange rates, Inflation and prices, Monetary policy framework
December 23, 2003

The Comparative Growth of Goods and Services Prices

Bank of Canada Review - Winter 2003-2004 Edith Gagnon, Patrick Sabourin, Sébastien Lavoie
For several decades, the prices of services have been rising more rapidly than the prices of goods in Canada and the other major industrialized countries. In 2002, this gap between the growth rates of these two components of the consumer price index (CPI) widened considerably, leading researchers to ask if this was the beginning of a trend. Analysis reveals, however, that the gap is based on short-term dynamics and that it appears to be independent of the trend in the development of the overall price level. Evidence also shows that the gap is eventually reabsorbed. The authors examine a number of potential causes for the prices of services to rise faster than those of goods. These include the more rapid pace of productivity growth in the goods sector, the greater openness of goods to foreign trade, and stronger growth in the demand for services.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Inflation and prices, International topics, Productivity

Nominal Rigidities and Exchange Rate Pass-Through in a Structural Model of a Small Open Economy

Staff Working Paper 2003-29 Steve Ambler, Ali Dib, Nooman Rebei
The authors analyze exchange rate pass-through in an estimated structural model of a small open economy that incorporates three types of nominal rigidity (wages and the prices of domestically produced and imported goods) and eight different structural shocks. The model is estimated using quarterly data from Canada and the United States.
Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models, Exchange rates, Inflation and prices, International topics JEL Code(s): F, F2, F3, F31, F33

Explaining and Forecasting Inflation in Emerging Markets: The Case of Mexico

Staff Working Paper 2003-17 Jeannine Bailliu, Daniel Garcés, Mark Kruger, Miguel Messmacher
The authors apply existing inflation models that have worked well in industrialized countries to Mexico, an emerging market that has recently moved to adopt an inflation-targeting framework for monetary policy. They compare the performance of these models with a mark-up model that has been used extensively to analyze inflation in Mexico.
Content Type(s): Staff research, Staff working papers Topic(s): Inflation and prices, International topics JEL Code(s): E, E3, E31, E37

Oil-Price Shocks and Retail Energy Prices in Canada

Staff Working Paper 2002-38 Marwan Chacra
The effects of global energy-price shocks on retail energy prices in Canada are examined. More specifically, the author looks at the response of the consumer price indexes for gasoline, heating oil, natural gas, and electricity in Canada to movements in world crude oil prices.
Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Inflation and prices, Market structure and pricing JEL Code(s): C, C2, C22, C5, C51, C53, Q, Q4, Q40
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