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JOURNAL OF APPLIED BUSINESS AND ECONOMICS

Exchange Rate Pass-Through to External and Internal Prices: A Developing Country Perspective

Author(s): M. Nusrate Aziz, Muhammad Sabbir Rahman, Alauddin Majumder, Somnath Sen

Citation: M. Nusrate Aziz, Muhammad Sabbir Rahman, Alauddin Majumder, Somnath Sen, (2013) "Exchange Rate Pass-Through to External and Internal Prices: A Developing Country Perspective," Journal of Applied Business and Economics, Vol. 15, Iss. 3, pp. 128 - 143

Article Type: Research paper

Publisher: North American Business Press

Abstract:

We estimate the exchange rate pass-through to external and internal prices of a developing country,
specifically, Bangladesh. The study also examines whether the tradition view that exchange rate pass-
through should be ‘full’ for developing countries. We construct some variables which are not readily
available in existing databases. A full sample estimation indicates that exchange rate pass-through to
external prices is ‘full’, however, pass-through to internal prices is ‘partial’. Rolling regressions indicate
that the response of external prices to exchange rate movement has been constantly around unity until
2003, however, it has fallen rapidly in subsequent years. Response to internal prices has been found
unstable and relatively small.