Exchange rate changes and inflation in India: What is the extent of exchange rate pass-through to imports?

Yanamandra, Venkataramana

doi:10.1016/j.eap.2015.07.004

Cited by 36 publications

(32 citation statements)

References 36 publications

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“…Most of these studies ignored the likely asymmetrical ERPT to prices (inflation) underlined in the theoretical models of pricing to market, where foreign exporters adjust the prices in the importing country in response to the size and direction of exchange rate movements. Accordingly, recent studies consider nonlinearities and asymmetries in their investigation of the relationship between exchange rates and domestic prices in developed and emerging economies (Brun-Aguerre et al 2012Choudhri and Hakura 2015;Yanamandra 2015;Baharumshah et al 2017, among others). In fact, these studies revealed an asymmetrical and nonlinear ERPT to import prices as well as a more complete and higher pass-through during exchange rate depreciations than appreciations in the long term.…”

Section: Introductionmentioning

confidence: 99%

Asymmetry in Exchange Rate Pass-Through to Consumer Prices: New Perspective from Sub-Saharan African Countries

et al. 2019

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This paper examines the asymmetrical relationship between exchange rate and consumer prices in 40 sub-Saharan African (SSA) countries from 1990Q1 to 2017Q4. We estimate the exchange rate pass-through (ERPT) to consumer prices for each country by using the nonlinear autoregressive distributed lag (NARDL) framework and dynamic panel techniques robust to cross-sectional dependence. First, our findings suggest an asymmetrical ERPT in the SSA region during the short term, whereas there are mixed results across subregions in the long term. Second, the results of the panel analysis suggest incomplete and significant ERPT to consumer prices in the entire SSA region, which is higher during depreciation of the local currency than after appreciation in the short-term, especially in the CFA Franc zone. Third, we find nonlinear ERPT with respect to the size of the exchange rate. Finally, we find that pass-through is higher in countries with fixed exchange rate regimes (CFA franc zone) in a low inflationary environment than in countries with floating exchange rate regimes and high inflation levels. Pass-through is greater during large exchange rate changes than after small changes. Therefore, the policy implication is to consider these asymmetries and nonlinearities to improve monetary policy’s credibility, enhance trade liberalization, and promote competitive market structures in the SSA region.

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Section: Introductionmentioning

confidence: 99%

Asymmetry in Exchange Rate Pass-Through to Consumer Prices: New Perspective from Sub-Saharan African Countries

et al. 2019

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“…There are contradictory arguments on the relationship between inflation and the exchange rate in the literature related to the Indian scenario. Confirming the exchange rate pass-through effect, Goyal (2014) and Yanamandra (2015) argued that the INR/USD exchange rate fluctuation indirectly influences inflation in the economy. Some researchers argue that a stable exchange rate is not a determinant of low inflation in India, but the monetary policy of RBI determines it (Mohanty & Bhanumurthy, 2014).…”

Section: Review Of Empirical Studiesmentioning

confidence: 95%

“…It has two stages. In the first stage, exchange rate fluctuations transmit to import price, whereas in the second stage import price transfer to wholesale and consumer prices in the prevailing economic conditions (Yanamandra, 2015). Existing economic conditions and source of exchange rate volatility play an inevitable role in determining the degree of influence of exchange rate on inflation.…”

Section: Introductionmentioning

confidence: 99%

Measuring the Impact of Oil Prices and Exchange Rate Shocks on Inflation: Evidence from India

Sharma

Rishad

Gupta

2019

EJBE

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The purpose of this study is to examine the long-run and short-run impact of crude oil price and exchange rate shocks on domestic inflation in India within the framework of the Autoregressive Distributed Lag (ARDL) model. The results show that the exchange rate and oil price shocks significantly influence domestic inflation during the study period (April 1994 to February 2018. Further, the breakpoint unit root test revealed the severe impact of the 2008 financial crisis on inflation in India. The findings show that any move to scale down fuel subsidies will escalate cost-push inflation severely, as the country is an energy-dependent economy. So, policymakers shall stabilise the impact of these shocks through suitable monetary policy actions.

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“…Previous papers on BRICS countries have exclusively focused on a particular country (most of them in China, India or South Africa). Thus, while most of the studies for India analyse the first‐stage ERPT (i.e., ERPT into import prices) by using a single econometric approach (see Dash & Narasimhan, ; Mallick & Marques, ; Pyne & Roy, ; Yanamandra, ), few authors examine the ERPT into domestic prices (either producer price index or consumer price index), which is so‐called the second‐stage ERPT. Many of these mentioned studies find that ERPT into import price for India is, at least, complete in the short run and more than complete in the long run (see, e.g., Yanamandra, ).…”

Section: Introductionmentioning

confidence: 99%

“…Although theoretical ERPT should be between 0 and 1, it has been found in the related empirical literature (see, e.g.,Dash and Narasimhan, 2011;Rajan and Yanamandra, 2015;Yanamandra, 2015) that the ERPT may be more than complete (i.e., the corresponding coefficient may be larger than 1).21 The exchange rate regime does not change in Brazil and South Africa during the period studied and, consequently, the variable referred to this was not included in the analysis of these countries.…”

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confidence: 99%

BRICS: How important is the exchange rate pass‐through?

Jiménez‐Rodríguez

Morales‐Zumaquero

2019

World Economy

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This paper analyses the exchange rate pass‐through (ERPT) into domestic consumer prices in BRICS (Brazil, Russia, India, China and South Africa) countries from mid‐1990s onwards by using three different econometric approaches (i.e., the single equation approach, the VAR approach and the time‐varying parameter approach). It is also studied the role of macroeconomic determinants in ERPT. Our results suggest that (a) ERPT is higher for the emerging markets with mostly floating exchange rates (Brazil, Russia and South Africa) than for the other BRICS countries; (b) exchange rate explains, on average, around the 40% of the price variance for Brazil, Russia and South Africa; and (c) inflation volatility, exchange rate volatility and openness seem to be the key macroeconomic determinants in BRICS countries.

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Exchange rate changes and inflation in India: What is the extent of exchange rate pass-through to imports?

Cited by 36 publications

References 36 publications

Asymmetry in Exchange Rate Pass-Through to Consumer Prices: New Perspective from Sub-Saharan African Countries

Asymmetry in Exchange Rate Pass-Through to Consumer Prices: New Perspective from Sub-Saharan African Countries

Measuring the Impact of Oil Prices and Exchange Rate Shocks on Inflation: Evidence from India

BRICS: How important is the exchange rate pass‐through?

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