Exchange rate pass‐through to import prices: Evidence from a heterogeneous panel of West African countries

Abstract

AbstractThis study analyzes the effect of exchange rate pass‐through (ERPT) on the import prices of West African countries. We used a heterogeneous dynamic panel over the period 1991–2018 and estimated the ERPT using the pooled mean group, mean group, and augmented mean group. The results show that an exchange rate appreciation of 1% in the short term leads to a decrease in the price of imports by 0.25% and 0.20%, respectively, for the West African Economic and Monetary Union (WAEMU) countries and those outside the WAEMU zone. However, considering other countries, we find that the ERPT has a long‐term effect and causes a rise in import prices of 0.83%. This effect depends on the level of inflation. Thus, the pass‐through effect appears to be heterogeneous across countries.