Vol 3, No 3 (2015)
Exchange-Rate Pass-Through: Empirical Evidence from Sudan Economy
Khalafalla Ahmed Mohamed Arabi
Abstract
This paper aims to assess the pass-through effect of exchange rate to import and consumer prices in Sudan via Vector Error Correction Model. Short-run estimates of either import prices or consumer price are insignificant, suggesting that the adjustment in Sudan tends to be slow. NEER affects consumer and import prices in the long-run by –1.07 and -1.92 respectively. The ratio of cumulative responses of import prices to exchange rate changes i.e. Exchange rate pass-through (ERPT) into consumer and import prices has been increasing gradually with an average of 47 and 50 respectively. Variance decomposition indicate that one standard deviation shock to the CPI creates downward trend of its own innovations, upward trend of real GDP, excess money and the exchange rate respectively. This means that there is strong link between consumer prices and monetary policy.
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Keywords
ERPT; Import prices; VECM; Slow adjustment.
Publication information
Volume 3, Issue 3
Year of Publication: 2015
ISSN: 1857 - 8721
Publisher: EDNOTERA
How to cite
Arabi, K. A. M.: Exchange-Rate Pass-Through: Empirical Evidence from Sudan Economy. Journal of Applied Economics and Business, Vol 3, No. 3, 5-24. (2015)