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Prepared by Sergi Lanau and Christina Kolerus. We thank the staff of the central bank for their useful comments.
According to the JP Morgan broad nominal trade-weighted exchange rate index as reported by Haver.
A much simpler measure based on actual data between July 2016 and January 2016 yields a pass-through of 0.042. Over the period, the partial elasticity of the tradable CPI excluding food and regulated items to the NEER weighted by nontraditional trade was 4.2 percent. We are grateful to the authorities for pointing us to this simple and transparent method.
The results are robust to alternative orderings.
The local projection method obtains impulse response functions from running a series of linear regressions for k time horizons:
Structural changes in the period 1992-2015 such as the transition to a currency band in 1992–94 and the flotation of the exchange rate in 1999 could bias the estimates.