0 an increase in the price a customer pays because of an increase in a company's costs:
1 an arrangement in which a financial organization buys loans from a bank and sells bonds representing these loans to investors. The payments on the loans are then used to pay interest to the investors and pay back the bonds:
This paper analyzes exchange-rate dynamics following a money-based disinflation under different degrees of exchange-rate pass-through.
Figure 1 shows results for s = 0.5 (the plot with stars) and s = 1.0 (the plot with diamonds), both cases representing incomplete pass-through.
However, while the pass-through is high, complying with this objective implies achieving a stable exchange rate.
For an exchange-rate-based policy, the degree of exchange-rate pass-through makes little difference to the impact of a disinflation.
The most recent data suggest that the pass-through has fallen substantially since 1999.
Varying the degree of pass-through, however, significantly alters the magnitudes of these effects.
Nominal stability will remain under question until the high inflationary pass-through of depreciation has been eliminated.
Analyzing the effects of disinflation under incomplete pass-through, however, significantly alters the magnitudes of these effects.
