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A long-standing conjecture in macroeconomics is that recent declines in exchange rate pass-through are in part due to improved monetary policy performance. In a large sample of emerging and advanced economies, we find evidence of a strong link between exchange rate pass-through to consumer prices and the monetary policy regime’s performance in delivering price stability. Using input-output tables, we decompose exchange rate pass-through to consumer prices into a component that reflects the adjustment of imported goods at the border, and another that captures the response of all other prices. We find that price stability and central bank credibility have reduced the second component.

Foreign Exchange --- Inflation --- Macroeconomics --- Price Level --- Deflation --- Monetary Policy --- Open Economy Macroeconomics --- Currency --- Foreign exchange --- Exchange rate pass-through --- Consumer prices --- Import prices --- Nominal effective exchange rate --- Prices --- Imports --- United States

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Co-movement (synchronicity) in inflation rates among a set of 13 emerging and developing countries in Asia is shown to be strongest for the food component, partly due to common rainfall shocks—a result which the paper terms the ‘monsoon effect.’ Economies with higher trade integration and co-movement in nominal effective exchange rates also experience greater food-inflation co-movement. By contrast, cross-country co-movement in core inflation is weak and the aforementioned determinants have little explanatory power, suggesting a prominent role for idiosyncratic domestic factors in driving core inflation. In the context of the growing literature on the globalization of inflation, these results suggest that common weather patterns are partly responsible for any role played by a so-called ‘global factor’ among inflation rates in emerging and developing economies, in Asia at least.

Inflation (Finance) --- Finance --- Natural rate of unemployment --- Exports and Imports --- Foreign Exchange --- Inflation --- Macroeconomics --- Price Level --- Deflation --- Economic Integration --- Globalization: Macroeconomic Impacts --- Financial Aspects of Economic Integration --- Agriculture: Aggregate Supply and Demand Analysis --- Prices --- International economics --- Currency --- Foreign exchange --- Trade integration --- Nominal effective exchange rate --- Food prices --- Economic integration --- International economic integration --- India

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This paper examines the causes of deflation in Hong Kong SAR, exploring whether it reflects a prolonged process of adjustment to cyclical shocks or whether it results from price equalization pressures arising from structural integration with mainland China. To gauge the relative importance of these factors, the paper provides both an econometric and a qualitative analysis of the price dynamics between Hong Kong SAR and Shenzhen, a neighboring city in mainland China. It finds that the role of price equalization as a source of deflation is minor. Deflation in Hong Kong SAR is best explained by successive cyclical shocks which have been amplified by balance-sheet and wealth effects.

Foreign Exchange --- Inflation --- Macroeconomics --- Real Estate --- Price Level --- Deflation --- Macroeconomic Aspects of International Trade and Finance: General --- Nonagricultural and Nonresidential Real Estate Markets --- Currency --- Foreign exchange --- Property & real estate --- Nominal effective exchange rate --- Land prices --- Consumer price indexes --- Prices --- Asset prices --- Housing --- Price indexes --- Hong Kong Special Administrative Region, People's Republic of China

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Long-run movements of real exchange rates are studied using a panel data set comprising 51 economies. The purchasing power parity hypothesis (PPP) is examined first using unit root tests. It is found that PPP does not hold for the full sample of countries, but it may hold for the advanced economies, as well as open and high-inflation economies. Using the recently developed mean group and pooled mean group estimators, the paper finds support for the Balassa-Samuelson hypothesis in both advanced and developing economies; and for the influence of shifts in the terms of trade.

Exports and Imports --- Foreign Exchange --- Inflation --- Empirical Studies of Trade --- Price Level --- Deflation --- Currency --- Foreign exchange --- International economics --- Macroeconomics --- Real exchange rates --- Purchasing power parity --- Exchange rates --- Terms of trade --- Nominal effective exchange rate --- International trade --- Prices --- Economic policy --- nternational cooperation --- Chile --- Nternational cooperation

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This paper derives a set of leading indicators of inflation for Sweden. It also discusses methodological and policy issues pertaining to the estimation of these indicators. The main findings are: (1) narrow money is the most powerful leading inflation indicator; (2) broad money and inflation expectations have significant predictive information on inflation; (3) the output gap, interest rates, and the credit aggregate have some predictive information on inflation, and this information is confined to a shorter time horizon than either the monetary aggregates or inflation expectations; and (4) implied forward rates have only weak predictive information on inflation.

Foreign Exchange --- Inflation --- Macroeconomics --- Money and Monetary Policy --- Monetary Policy --- Price Level --- Deflation --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Currency --- Foreign exchange --- Monetary economics --- Economic growth --- Inflation targeting --- Cyclical indicators --- Nominal effective exchange rate --- Exchange rates --- Prices --- Monetary policy --- Business cycles --- Sweden