The role of inflation regime in the exchange rate pass-through to import prices

► Taylor (2000) suggests that exchange rate pass-through and inflation are correlated. ► Many previous studies reject this suggestion. ► Introduce the possibility of nonlinear effects of inflation in the ERPT mechanism. ► For data from 9 OECD countries there are nonlinear effects from inflation to ERPT. ► Taking these into account supports positive correlation between ERPT and inflation.