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A Closer look at Exchange Rate Induced Inflation in Ethiopia
Stockholm University, Faculty of Social Sciences, Department of Economics.
(English)Manuscript (preprint) (Other academic)
Abstract [en]

In this paper, we examine the rate of exchange rate pass-through (ERPT) to domestic prices with a particular focus on the Ethiopian economy. We have employed a Structural Vector Autoregressive (SVAR) model where identification is achieved based on a combination of short- and long-run restrictions. The long-run identifying restrictions are derived from a simple small open economy macro model. The results from the impulse response analysis point to a pass-through rate that starts out small but steadily increases in subsequent quarters, becoming close to complete in about two years. According to the variance decomposition results, however, other macroeconomic shocks, including shocks to aggregate demand, output supply as well as shocks to foreign financial flows and trade balance appear to play an important role in explaining the variation in inflation in Ethiopia.

Keyword [en]
Exchange Rate, Pass-through, Inflation, SVAR, Ethiopia
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:su:diva-136997OAI: oai:DiVA.org:su-136997DiVA: diva2:1058200
Available from: 2016-12-20 Created: 2016-12-20 Last updated: 2017-01-09
In thesis
1. Essays in International trade, exchange rates and prices
Open this publication in new window or tab >>Essays in International trade, exchange rates and prices
2017 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis consists of three self-contained essays in International Trade, Exchange Rates and Prices. Although independent, these essays share some common themes. The first two papers can be related to the vast literature on exchange rate pass-through to prices. While the first paper uses firm-product level data from Sweden to study firms’ export price response to movements in exchange rate, the second paper employs aggregate level data from Ethiopia and looks at the issue from the importers’ perspective. The third paper, like the first paper, uses Swedish firm-level data and investigates firms’ exporting behavior. The third paper, however, specifically focuses on export margins of multi-product firms and studies their response when exporting to destinations of different size and distance from the home country.

Place, publisher, year, edition, pages
Stockholm: Department of Economics, Stockholm University, 2017. 17 p.
Series
Dissertations in Economics, ISSN 1404-3491 ; 2017:1
Keyword
Heterogeneous Firms, Multi-product firms, Exports, Market size, Distance, Exchange rates, Exchange Rate Pass-through, Inflation, SVAR, Sweden, Ethiopia
National Category
Economics
Research subject
Economics
Identifiers
urn:nbn:se:su:diva-137002 (URN)978-91-7649-608-4 (ISBN)978-91-7649-609-1 (ISBN)
Public defence
2017-02-14, Nordenskiöldsalen, Geovetenskapens hus, Svante Arrhenius väg 12, Stockholm, 13:00 (English)
Opponent
Supervisors
Note

At the time of the doctoral defense, the following papers were unpublished and had a status as follows: Paper 1: Manuscript. Paper 2: Manuscript. Paper 3: Manuscript.

Available from: 2017-01-20 Created: 2016-12-20 Last updated: 2017-01-27Bibliographically approved

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