Disinflation and exchange-rate pass-through

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Senay O.

MACROECONOMIC DYNAMICS, cilt.12, sa.2, ss.234-256, 2008 (SSCI İndekslerine Giren Dergi) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 12 Konu: 2
  • Basım Tarihi: 2008
  • Doi Numarası: 10.1017/s1365100507070022
  • Sayfa Sayıları: ss.234-256


This paper analyzes exchange-rate dynamics following a money-based disinflation under different degrees of exchange-rate pass-through. Using a microfounded dynamic general equilibrium model with imperfect competition and nominal rigidities, it is shown that a monetary slowdown causes an appreciation of the exchange rate and a short-run fall in employment. Varying the degree of pass-through, however, significantly alters the magnitudes of these effects. As the degree of pass-through is reduced, the extent of the short-run appreciation of the exchange rate increases and the short-run impact of the disinflation on employment falls.