Changes in Exchange Rate Pass-Through in Iran

The exchange rate is one of the macroeconomic fundamentals which significantly affect inflation. For policy makers who care about the inflation control, analyzing the relationship between exchange rate changes and domestic inflation is very important matter. In this study we carry out an investigation about Exchange rate pass through in Iran using econometric model. According to the results, Exchange Rate Pass-Through (ERPT) in Iran fluctuates within 30-40 range. Also, exchange rate pass through in producer prices is significantly lower than consumer prices. Furthermore based on results, more distance from Dual exchange rate regime, higher degree of trade openness increase ERPT and lower inflation volatility and exchange rate volatility can decrease ERPT. In the most countries applying stable monetary policy and inflation targeting policy lead to decrease of ERPT.