Article ID Journal Published Year Pages File Type
5052796 Economic Analysis and Policy 2015 31 Pages PDF
Abstract
Absence of inflation hedges and lack of inflation indexation in India make the society very sensitive to inflationary pressures. A potential source of such pressures that is often mentioned is the depreciation of the Indian rupee which has occurred over the last few years. This study computes the exchange rate pass-through into import prices of India at the aggregate level for the period 2003m1 to 2013m3 using both trade-weighted and bilateral USD exchange rates. The study also examines the asymmetry and non-linearity in the exchange rate pass-through at the aggregate level. The results suggest that there is more than complete exchange rate pass-through into Indian import prices in the short run and even higher pass-through in the long run, indicating the inertial effect of rising prices. There is also evidence of non-linearity in exchange rate pass-through, in terms of whether the rupee is appreciating or depreciating, as well as in terms of whether there are small or large changes in the rupee value.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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