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Exchange Rate Pass-Through in CIS Countries

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Abstract

We analyze exchange rate pass-through in seven CIS countries using monthly data from 1999 to 2010. In the short run, VAR models estimates show that exchange rate movements in the US dollar affect consumer prices to a relatively high degree (about 50%), while the Euro exchange rate is less important. Moreover, short-run exchange rate pass-through is very heterogeneous across countries. In particular, countries with high-energy imports from Russia generally have higher exchange rate pass-through. In the long run, panel cointegration results show pass-through rates of 60% and above for both the US dollar and Euro exchange rates.

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Notes

  1. Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, and Uzbekistan are members of the CIS. Turkmenistan and Ukraine are no official members but they participate in activities of the CIS. We also include Georgia, who was a CIS member between 1993 and 2009.

  2. Results are available upon request from the authors.

  3. Results are available upon request from the authors.

  4. Purchasing power parity theory predicts that real exchange rates should be stationary, which implies complete exchange rate pass-through. Therefore, the weak results of panel cointegration tests for some specifications may arise because exchange rate pass-through is incomplete. Despite the ambiguity of panel cointegration tests, the estimated coefficients still provide consistent estimates of the exchange rate pass-through because panel models avoid the problem of spurious regression by using pooled data (Phillips and Moon, 1999; Kao, 1999).

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Acknowledgements

The authors would like to thank the participants of the conference on Fiscal Stabilization and Monetary Union, Mendel University Brno, November 2011, as well as Aleksandra Riedl and Campbell Leith for valuable comments and suggestions. The views are the authors’ and do not necessarily reflect those of the Oesterreichische Nationalbank or the Eurosystem.

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Authors and Affiliations

  1. Foreign Research Division, Oesterreichische Nationalbank, POB 61, Vienna, A-1011, Austria

    Elisabeth Beckmann

  2. Zeppelin University, Am Seemoser Horn 20, Friedrichshafen, D-88045, Germany

    Jarko Fidrmuc

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  1. Elisabeth Beckmann
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  2. Jarko Fidrmuc
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Beckmann, E., Fidrmuc, J. Exchange Rate Pass-Through in CIS Countries. Comp Econ Stud 55, 705–720 (2013). https://doi.org/10.1057/ces.2013.8

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