Exchange Rate Pass-Through in CIS Countries: VAR Evidence

Exchange rate pass-through is an important determinant of monetary policy in small emerging economies. In particular, several earlier studies show that the exchange rate pass-through was comparatively high in the Commonwealth of Independent States (CIS) especially during the first years after the Russian crisis between 1999 and 2004. However, the more recent period of economic stabilization with lower inflation and also the current period characterized by the global crisis have hitherto not been studied empirically for the CIS countries on a comparative basis. This paper estimates VAR models with monthly data from 1999 to 2010 for seven CIS countries using impulse response functions and variance decompositions. Exchange rate movements in the US dollar are shown to affect consumer prices to a relatively high degree, while the Euro exchange rate is important only for a few countries. Estimates for the different countries are heterogeneous, roughly falling into two categories according to energy importing and exporting countries. We find some indications that CIS exchange rate pass-through is becoming more in line with findings in the rest of the world. It remains high, however, thus representing a main challenge for current financial and macroeconomic stabilization.

Projektbeginn: 01.05.2011
Projektende: 31.12.2013

Prof. Dr. Jarko Fidrmuc, Elisabeth Beckmann MA

Zeppelin University Friedrichshafen