The Evolution of Exchange Rate Pass-Through in Turkey: Does Inflation Targeting Matter?

Abstract

In this paper, we aim to investigate the behaviour of exchange rate pass-through in Turkey. We examine how the pass-through evolves over time by employing a rolling VAR. We find that the exchange rate pass-through has declined sharply after the adoption of inflation targeting regime. Additionally, we find that the exchange rate has a larger impact on the producer prices than on the consumer prices, and the gap between two impacts has significantly increased after the implementation of inflation targeting

Keywords

• Exchange Rate, Pass-Through, Rolling Var, Inflation Targeting

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