Work detail

Exchange Rate Pass-Through in Mongolia

Author: Mgr. Sanjidmaa Batmunkh
Year: 2014 - summer
Leaders: doc. Mgr. Tomáš Holub Ph.D.
Work type: Masters
Language: English
Pages: 77
Awards and prizes:
Abstract: This thesis investigates the exchange rate pass-through to consumer prices, and its non-linearity and
asymmetry effect in Mongolia. The recursive VAR model and non-linear econometric model are applied
using monthly data from January 2000 to December 2013. We find that exchange rate pass-through is
high and incomplete both in the short and in the long run in Mongolia. There is a statistically significant
asymmetry effect, which states that impact of exchange rate depreciation on consumer price is higher
than appreciation. However, we do not find an evidence of non-linearity in consumer price reaction to
the large and small absolute changes of the exchange rate relative to its sample average and median as a
threshold level. Additionally, we estimate the importance of the exchange rate shock for the consumer
price variation using variance decomposition technique. In spite of this relatively high pass through, the
exchange rate shocks explain a relatively small percentage of the variation in CPI inflation.




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