Abstract
Staff Studies is the bi-annual (March and September) peer-reviewed journal of the Central Bank of Sri Lanka. The Journal aims at stimulating innovative research for the analysis of current macroeconomic issues and policy challenges faced by central banks while providing a forum to present recent theoretical and empirical research.
Highlights
This paper examines exchange rate pass-through into prices in Sri Lanka
The significance of exchange rate pass-through in understanding how prices behave in the domestic economy is further heightened by the fact that domestic markets are becoming increasingly integrated with global markets, with the liberalisation of the domestic economy
While these findings suggest that exchange rate pass-through is incomplete in Sri Lanka, at about 50 per cent, this phenomenon has been found to be common to many countries, with some of the effect of a change in the exchange rate being absorbed in the mark-ups of the exporters or the profit margins of importers
Summary
Price stability being a core objective of the central bank, and given that monetary policy is the tool with which the central bank has to achieve price stability, it is important to understand those factors which govern or impact upon the effectiveness of monetary policy. It is in this context that a clear understanding of exchange rate pass-through, that is, how changes in the external value of the domestic currency affect domestic prices, is important, the exchange rate being a channel of monetary policy transmission. An analysis of domestic prices in relation to changes in the exchange rate is important, especially in the context of the floating exchange rate regime that has been in operation since 2001
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
