Iranian Economic Review

Iranian Economic Review

Exchange Rate Pass-Through and Inflation in Dollarized Economies: Evidence from the Middle Eastern and North African Countries

Document Type : Research Paper

Authors
Seyed Kamal Sadeghi 1
Majid Feshari 2
Maryam Barzegar Marvasti 3
Zhila Ghanbari 4
1 Associate Professor, University of Tabriz, Iran
2 Assistant Professor, Kharazmi University, Iran
3 Ph.D. Candidate, University of Tabriz, Iran
4 MSc. Student, University of Tabriz, Iran
10.22059/ier.2015.56075
Abstract
T
he investigation of exchange rate pass-through is an important issue in international finance. The relationship between exchange rate pass-through and exchange rate arrangements such as the dollarization regime has been examined in recent decades. For this purpose, the main objective of this study is to investigate the effect of exchange rate pass-through on the domestic inflation in selected Middle Eastern and North Africancountries with emphasis on the dollarization regime over the period from 1994 to 2012. The empirical model has been estimated by GMM approach for these countries. The main findings of this paper reveal that exchange rate appreciation (currency depreciation) has a positive and significant influence on the domestic inflation, and this effect is greater than in highly dollarized economies.
Keywords
Dollarization
exchange rate pass-through
Generalized Method of Moments
Inflation
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Iranian Economic Review
Volume 19, Issue 2 - Serial Number 2
Spring 2015
Pages 139-147