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dc.contributor.authorBoug, Pål
dc.contributor.authorCappelen, Ådne
dc.contributor.authorEika, Torbjørn
dc.date.accessioned2011-11-22T11:34:12Z
dc.date.available2011-11-22T11:34:12Z
dc.date.issued2005
dc.identifier.issn1892-753x
dc.identifier.urihttp://hdl.handle.net/11250/180145
dc.description.abstractAbstract: Several small open economies switched to inflation targeting during the 1990s, thereby giving up various forms of exchange rate targeting in favour of flexible exchange rates. Norway did the same early in 2001, and has thereafter experienced highly varying nominal exchange rates with consumer price inflation dropping far below the target during 2003 and 2004. Knowledge of the degree of exchange rate pass-through to import prices and further to consumer prices is essential for inflation targeting. The literature suggests that pass-through is greater to import prices than to consumer prices, which presumably is related to the role of distributors in the economy. We present empirical evidence on these issues for Norway by estimating import price equations and a dynamic model of the distributors pricing behaviour. Using a large-scale macroeconometric model of the Norwegian economy, we find exchange rate pass-through to import prices to be quite rapid in the short run, while pass-through to consumer prices seems to be modest. We show that, among the numerous channels through which the exchange rate operate, trade margins in the distribution sector act as cushions to exchange rate fluctuations, thereby being one of the main important source for the delay in pass-through. In spite of moderate pass-through to consumer prices, we find inflationary effects of exchange rate changes even in the short run, an insight important for inflation targeting central banks. Keywords: Exchange rate pass-through, pricing behaviour, the distribution sector, econometric modelling and macroeconomic analysisno_NO
dc.language.isoengno_NO
dc.publisherStatistics Norway, Research Departmentno_NO
dc.relation.ispartofseriesDiscussion Papers;No. 429
dc.subjectSmall open economyno_NO
dc.subjectInflation targetingno_NO
dc.subjectNorwayno_NO
dc.subjectExchange ratesno_NO
dc.subjectPricing behaviourno_NO
dc.subjectEconometric modelingno_NO
dc.subjectMacroeconomic analysisno_NO
dc.subjectJEL classification: C51no_NO
dc.subjectJEL classification: C52no_NO
dc.subjectJEL classification: E31no_NO
dc.subjectJEL classification: F31no_NO
dc.titleExchange rate pass-through in a Small Open Economyno_NO
dc.typeWorking paperno_NO
dc.subject.nsiVDP::Social science: 200::Economics: 210::Economics: 212no_NO
dc.source.pagenumber43 s.no_NO


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