Does the exchange rate pass-through into prices change when inflation targeting is adopted? The Peruvian case study between 1994 and 2007

► Analysis whether the exchange rate pass-through into prices changed when the IT adopted in Peru. ► A simulated small DSGE model shows that IT induces an increase in exchange rate volatility. ► Therefore, adopting IT generates a pass-through contraction. ► The results using a TV-VAR model reveal that adoption of IT decreased the exchange rate pass-through. ► The results are consistent and robust to different specifications.