Pass-through in dollarized countries: should Ecuador abandon the US dollar?

Cristo, María Lorena Marí del; Gómez‐Puig, Marta

doi:10.1080/00036846.2013.786166

Cited by 3 publications

(1 citation statement)

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“…Inflation is indeed lower, especially in emerging markets, by some 4% when the central banks both de jure commits and de facto pegs the exchange rate rather than when it de facto pegs alone (Ghosh et al, 2014). Euroized countries should have very low pass-through inflation as their currencies are anchored to that of their principal trade partners (Del Cristo et al, 2012). Broad money clearly enters short-term inflation determinants (Lissovolik, 2003).…”

Section: Literature Reviewmentioning

confidence: 99%

Forecasting Inflation: A Combination Approach

Bojaj

Djurovic

2020

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The objective of this paper is to investigate and forecast the determinants of Montenegrin inflation empirically, using forecast combination methods, from January 2006 to December 2016, and out-of-sample 12-month horizon forecasting from January 2017 to December 2017. The main research problem is that given the struggle policymakers have had to define proper criteria to diagnose the onset of inflation indicators, we felt compelled to identify an approach and methodology that the government of Montenegro can use in the threshold to accessing the European Union. We examine three individual-predictor SVAR models to forecast inflation. Model 1 examines the internal determinants of inflation. Model 2 relates to demand-pull and cost-push variables. Model 3 examines external determinants. Combining the above three forecasts, we disclose two more RMSEs: equal and inverse MSE weights. Model 1 predicts inflation at 1.3%, the inverse MSE at 1.5%, and the weighted average at 1.4%. They show forecasting performances that are sustainable and average inflation not more than 1.5% above the rate of the three best performing Member states: Cyprus (0.2%), Ireland (0.3%), and Finland (0.8%) over the 12 months covering April 2017-March 2018. Our findings allow the policymakers to understand the factors involved in identifying the onset of inflation dynamics and inflation expectations in Montenegro better and develop more effective government regulations that can be employed nationally. In so doing, this research advances and recommends the toolset needed, combining forecasts, to combat the concerns of many macroprudential policymakers in Montenegro, especially the Central Bank of Montenegro.

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Section: Literature Reviewmentioning

confidence: 99%

Forecasting Inflation: A Combination Approach

Bojaj

Djurovic

2020

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Fiscal sustainability and dollarization: the case of Ecuador

Cristo

Gómez‐Puig

2015

Applied Economics

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Inflation dynamics in a dollarised economy: The case of Zimbabwe

Kavila¹,

Roux

2019

SABR

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This paper explores the dynamics of inflation in the dollarised Zimbabwean economy using the autoregressive distributed lag (ARDL) model with monthly data from 2009:1 to 2012:12. The main determinants of inflation were found to be the US dollar/South African rand exchange rate, international oil prices, lagged Zimbabwean inflation rate and South African inflation rate. During the local currency era, inflation dynamics in Zimbabwe were explained by excess growth in money supply, changes in import and administered prices, unit labour costs and output (Chhibber, Cottani, Firuzabadi & Walton 1989). According to Makochekanwa (2007), hyperinflation during the same era was attributed to excess money supply growth, lagged inflation and political factors. Coorey, Clausen, Funke, Munoz & Ould-Abdallah (2007) affirmed these findings by identifying excess money supply growth as a source of high inflation in Zimbabwe during the local currency era. In essence, the findings of this study point to a shift in inflation dynamics in Zimbabwe. This shift in inflation dynamics means that policies, which were used to respond to both internal and external shocks that have an impact on price formation, might not be applicable in a dollarised economy.

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Pass-through in dollarized countries: should Ecuador abandon the US dollar?

Cited by 3 publications

References 45 publications

Forecasting Inflation: A Combination Approach

Forecasting Inflation: A Combination Approach

Fiscal sustainability and dollarization: the case of Ecuador

Inflation dynamics in a dollarised economy: The case of Zimbabwe

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