Overview
Exchange-rate pass-through is a conditional response, not a constant: its size and timing vary with the price endpoint, horizon, inflation, volatility, market structure, policy credibility, fiscal conditions, labor markets, and shock identification. BIS cross-country evidence maps this variation; IMF evidence from Singapore shows how policy feedback and goods and services produce different responses. The series teaches readers to compare commensurate estimates without turning historical averages into universal coefficients.
Learning outcomes
- Pass-through is a conditional response, not a fixed conversion from a currency movement to consumer prices.
- BIS results associate CPI pass-through with inflation, volatility, economy size, product homogeneity, and policy conditions, without establishing a causal ranking.
- A cumulative one-year average can conceal differences in timing, price components, samples, horizons, and shock definitions.
- In Singapore, the IMF finds stronger responses to plausibly unexpected S$NEER shocks, while tight labor markets weaken transmission, especially for services.
Keywords
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PlansFAQ
What does an exchange-rate pass-through estimate measure?
It measures the estimated response of a specified price index to a defined exchange-rate movement over a stated horizon. It is not a constant property of a currency or every firm's pricing.
Why does exchange-rate pass-through differ across countries and periods?
It differs because inflation, volatility, economy size, product composition, market structure, policy credibility, fiscal conditions, and labor markets change the transmission environment. BIS results show associations, not a universal causal ranking.
Can pass-through estimates from different studies be compared?
Only when their exchange-rate shock, sign convention, price endpoint, horizon, sample, and response convention are sufficiently aligned. Otherwise, they may answer different questions even when they use the same label.
What does Singapore reveal about exchange-rate pass-through?
Singapore shows why identification and state conditions matter when the exchange rate is also the monetary-policy instrument. The IMF finds stronger responses from plausibly unexpected S$NEER shocks than from raw changes, while tight labor markets weaken transmission, especially for services.