Global Price Pulse: The Dynamics of Exchange Rate Pass-Through

Introduction

In an increasingly interconnected world, a country’s domestic prices are not solely determined by internal factors. A key external force is the exchange rate, and the degree to which its fluctuations are reflected in a nation's inflation is known as exchange rate pass-through (ERPT). This course provides a comprehensive analysis of this vital macroeconomic concept, moving beyond theoretical models to examine real-world case studies and the factors that influence ERPT, from a country's trade openness to the credibility of its central bank. By the end of this program, you'll be able to quantify the impact of currency movements on inflation, anticipate future price trends, and formulate more effective policy and business strategies in a globalized economy.

Course Details

  • Duration: 10 days
  • Target Audience:
    • Central bank officials and monetary policy analysts
    • Financial risk managers and currency strategists
    • Economists and researchers specializing in international finance
    • Multinational corporation executives and import/export managers
    • International trade and development consultants
    • Students of international economics and finance

Learning Objectives

Upon completion of this course, you will be able to:

  1. Define and explain the concept of exchange rate pass-through (ERPT).
  2. Analyze the channels through which exchange rate movements affect inflation.
  3. Identify the key factors that influence the degree of ERPT.
  4. Differentiate between pass-through to import prices and pass-through to consumer prices.
  5. Evaluate the role of central bank credibility in moderating ERPT.
  6. Critique different econometric models for estimating ERPT.
  7. Assess the impact of global shocks on exchange rates and domestic inflation.
  8. Formulate policy recommendations to manage ERPT in various economic contexts.
  9. Interpret real-world data and case studies on ERPT in different countries.
  10. Forecast the potential inflationary effects of a currency depreciation or appreciation.

Course Modules

Module 1: The Core Relationship

  • Defining exchange rates and their movements
  • The concept of Purchasing Power Parity (PPP)
  • Introduction to imported inflation
  • The role of trade in the transmission mechanism
  • Initial exploration of the pass-through concept

Module 2: Channels of Pass-Through

  • The direct channel: imported goods prices
  • The indirect channel: intermediate goods and production costs
  • The role of demand-side effects
  • The impact on domestic competitors
  • Pass-through to different price indices (CPI vs. PPI)

Module 3: Factors Influencing Pass-Through

  • The credibility of monetary policy
  • The level of inflation and its stability
  • The import content of a country's consumption basket
  • Market structure and pricing behavior
  • The role of financial market development

Module 4: Monetary Policy and ERPT

  • Central bank's role in exchange rate management
  • The effectiveness of interest rates in managing ERPT
  • Unconventional monetary policy and its effects
  • The relationship between exchange rate regimes and pass-through
  • Case studies of inflation-targeting regimes

Module 5: Econometric Modeling of ERPT

  • Introduction to time-series analysis
  • Single-equation vs. multi-equation models
  • Structural VAR models and impulse response functions
  • Accounting for endogeneity in exchange rates
  • Practical exercises in data analysis

Module 6: Pass-Through in Different Economies

  • ERPT in advanced economies
  • Pass-through in emerging and developing economies
  • The "fear of floating" in some nations
  • The impact of commodity exports on exchange rates and inflation
  • Cross-country comparisons of ERPT

Module 7: The Role of Global Shocks

  • The impact of global financial crises on currency values
  • Geopolitical events and their effect on exchange rates
  • The role of global supply chain disruptions
  • Spillovers from major central bank policies
  • The interaction of local and global shocks

Module 8: Micro-Level Pass-Through

  • Firm-level pricing decisions
  • Invoicing currency and its importance
  • Hedging strategies of firms
  • The role of local distribution and retail margins
  • Analyzing incomplete pass-through

Module 9: ERPT and Financial Markets

  • The role of capital flows in currency movements
  • Currency speculation and its impact on inflation
  • The link between exchange rates and asset prices
  • Financial market volatility and risk management
  • Hedging strategies for businesses and investors

Module 10: The Expectations Channel

  • How expectations are formed and their influence
  • The self-fulfilling nature of expectations
  • The importance of central bank communication
  • Survey data on inflation and exchange rate expectations
  • Anchoring expectations in a volatile environment

Module 11: ERPT in Practice: Case Studies

  • The experience of high-inflation countries
  • The lessons from currency crises
  • Analyzing the pass-through of commodity price shocks
  • The impact of Brexit on the British pound and UK inflation
  • Recent inflationary episodes globally

Module 12: Policy Responses

  • Monetary policy tools for managing ERPT
  • Fiscal policy and its role
  • The use of macroprudential tools
  • Capital controls as a policy option
  • The importance of institutional credibility and independence

Module 13: The Future of ERPT

  • The impact of deglobalization and regionalization
  • The role of digital currencies and CBDCs
  • Climate change and its effect on trade patterns and prices
  • Technological advancements in forecasting
  • Ongoing research and unanswered questions

Module 14: Practical Tools and Techniques

  • Using software for econometric analysis
  • Building a simple ERPT model
  • Interpreting model output for policymakers
  • Scenario analysis and stress testing
  • Presenting findings to a non-technical audience

CERTIFICATION

  • Upon successful completion of this training, participants will be issued with Macskills Training and Development Institute Certificate

TRAINING VENUE

  • Training will be held at Macskills Training Centre. We also tailor make the training upon request at different locations across the world.

AIRPORT PICK UP AND ACCOMMODATION

  • Airport Pick Up is provided by the institute. Accommodation is arranged upon request

TERMS OF PAYMENT

Payment should be made to Macskills Development Institute bank account before the start of the training and receipts sent to info@macskillsdevelopment.com

For More Details call: +254-114-087-180

 

Global Price Pulse: The Dynamics Of Exchange Rate Pass-through in Japan
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