EXCHANGE RATE PASS-THROUGH INTO IMPORT PRICES:EVIDENCE FROM CENTRAL ASIA

This paper estimates the degree of exchange rate pass-through (ERPT) intoimport prices for Central Asiacountries over period 1995q11-2012q11 years.The additional study was done for Kazakhstan to determine the impact ofmoney regulating policy into short-run and long-run ERPT. The study ofERPT was done by employing cointegration analysis across five central Asiacountries: Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan.The paper analyzes three opportunities ofthe transmission of the export costinto ERPT using production price indices(PPI) of three major trading partnersof Central Asia countries: PPI of Russia, PPI of Turkey and PPI of China.In case with PPI of Russia the resultsshowed, that ERPT is extended beyondof 1 for Kazakhstan and Kyrgyzstan.Incomplete ERPT is indicated forTajikistan and Turkmenistan, and zero ERPT is indicated for Uzbekistan. Incase with PPI of Turkey, the elasticitiesof extent ERPT intoimport prices aremore higher then in case with PPI ofRussia, and elasticities for all CentralAsia countries are negative and significant. In case with PPI of China,incomplete ERPT is indicated for all Central Asia countries, except theKyrgyzstan, which has extended ERPT. In all cases this study showed thesignificance of ERPT, except only two cases for Kazakhstan and Tajikistanwith PPI of China. Also interesting, those elasticities ofERPT with PPI ofChina are lower comparing with othercases. In the special study of moneyregulation policy only for Kazakhstan theshort-run and long-run elasticities ofERPT are incomplete with PPI of Russia and PPI of Turkey, and they areextended with PPI of China