Analysis of Exchange Rate Pass-Through to Domestic Prices in Pakistan
Author: Talal Ahmad Kundi

Exchange rate pass-through to domestic price level is the phenomena which states that how much fluctuations in the exchange rate are translated into domestic price level. In past 30 years a huge depreciation of exchange rate is recorded in Pakistan. So this objectifies us to find out the long run and short run pass-through in Pakistan and other factors affecting domestic price level as well. Using monthly data from January 1991 to November 2019 and Auto-regressive distributed lagged model as an estimation technique to estimate the long run and short run results. The ERPT to consumer price index in the long run is 15.7 and 50.7% to Wholesale Prices while in the short run ERPT to CPI is 11.2% and these results are in line with the literature. It implies that in the long run the 1% depreciation in the exchange rate the consumer prices will increase by 0.157% and 0.112% in the short run. Overall the ERPT is significant but incomplete which suggests that the exchange rate depreciation is not the main factor of the rise in the inflation in Pakistan. Supervisor:- Dr. Abdul Jalil

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Supervisor: Abdul Jalil

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