Abstract
This paper estimates pass-through from the exchange rate to inflation in
Papua New Guinea using 1989-2004 data. Results display sensitivity to
how inflation and the exchange rate are measured. Pass-through is found
to be higher than previously estimated and evidence is presented that
pass-through has increased since the kina was floated. The paper
concludes that pass-through to underlying inflation is approximately 50-60
percent and is complete after between four and six quarters. It also finds
that exchange rate movements have been the main source of variation in
inflation during the sample period.
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