Arbeitspapier
Drivers of consumer prices and exchange rates in small open economies
We study the fluctuations of exchange rates and consumer prices in two small open economies, Sweden and Canada, using a structural Bayesian VAR. Four domestic and two global shocks are identified through zero and sign restrictions. For both economies, we find that the main driver of consumer price inflation is the global demand shock. A negative global demand shock is not only deflationary for the small open economy, but also depreciates its currency. Hence, the observed exchange rate pass-through following this shock is of opposite sign to what is usually expected. Finally, exogenous shocks to the exchange rate are less important drivers of exchange rate movements than in many other structural models.
- Sprache
-
Englisch
- Erschienen in
-
Series: Sveriges Riksbank Working Paper Series ; No. 387
Price Level; Inflation; Deflation
Monetary Policy
Foreign Exchange
Open Economy Macroeconomics
consumer prices
import prices
monetary policy
global shocks
SVAR
Di Casola, Paola
- Handle
- Letzte Aktualisierung
-
12.07.2024, 13:24 MESZ
Objekttyp
- Arbeitspapier
Beteiligte
- Corbo, Vesna
- Di Casola, Paola
- Sveriges Riksbank
Entstanden
- 2020