The Responsiveness of Consumer Prices to Exchange Rate in Russia

Abstract

In this paper we have empirically examined the exchange-rate pass-through effect to consumer prices and the movement of the effect in Russia during the period of 1999–2004. The evidence from vector autoregression model demonstrates that the average pass-through is low. We have also shown that in spite of gradual decreasing of inflation during that period and fall in dollar exchange rate in 2003, the exchange rate pass-through to prices risen after 2001. We suppose that the most important determinant of changes in pass-through over time is the growth of import share in consumption. In addition, we have shown that growth of exchange rate pass-through effect came from appreciation of the euro on domestic currency market.