Exchange Rate Pass-Through, Monetary Policy, and Real Exchange Rates: Iceland and the 2008 Crisis

Sebastian Edwards and Luis Cabezas

No 28520, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use detailed data for Iceland to examine two often-neglected aspects of the “exchange rate pass-through” problem. First, we investigate whether the pass-through coefficient varies with the degree of “international tradability” of goods. Second, we analyze if the pass-through coefficient depends on the monetary policy framework. We consider 12 disaggregated price indexes in Iceland for 2003-2019, a period that includes Iceland’s banking and currency crisis of 2008. We find that the pass-through declined around the time Iceland reformed its “flexible inflation targeting,” and that the coefficients are significantly higher for tradable than for nontradable goods.

JEL-codes: E31 E52 E58 F31 F41 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-opm
Note: IFM
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Citations: View citations in EconPapers (2)

Published as Sebastian Edwards & Luis Cabezas, 2022. "Exchange Rate Pass-Through, Monetary Policy, and Real Exchange Rates: Iceland and the 2008 Crisis," Open Economies Review, vol 33(2), pages 197-230.

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