Original Research
Exchange rate pass-through to domestic prices in Namibia: SVAR evidence
Journal of Economic and Financial Sciences | Vol 7, No 1 | a132 |
DOI: https://doi.org/10.4102/jef.v7i1.132
| © 2019 Johannes Sheefeni, Matthew Ocran
| This work is licensed under CC Attribution 4.0
Submitted: 22 December 2017 | Published: 30 April 2014
Submitted: 22 December 2017 | Published: 30 April 2014
About the author(s)
Johannes Sheefeni, Department of Economics, Nelson Mandela Metropolitan University, South AfricaMatthew Ocran, Department of Economics, Nelson Mandela Metropolitan University, South Africa
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This article investigates exchange rate pass-through to domestic prices in Namibia. The study covers the period of 1993:Q1 – 2011:Q4, and employed the impulse response functions and variance decompositions obtained from a structural vector autoregressive model. The results from the impulse response functions show that there is a high and long-lasting effect from changes in exchange rates to inflation in Namibia, or high exchange rate pass-through into domestic inflation. The results from the forecast error variance decompositions also reflect that changes in the price level evolve endogenously with changes in the exchange rate. The results are in agreement with the findings of the impulse response functions regarding the significant effect of the exchange rate variable on domestic prices (inflation). The results confirm an incomplete pass-through, indicating that the purchasing power parity theory does not hold, with regard to the price level, in the context of Namibia.
Keywords
exchange rate; short-run; pass-through; inflation; structural vector autoregressive; impulse response; Namibia
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