A survey of exchange rate pass-through in Asia

Exchange rate pass-through (ERPT) refers to the transmission of exchange-rate changes into import (export) prices of goods in the destination-market currency as well as into aggregate domestic prices. This paper examines the analytical and empirical literature on ERPT with particular reference to Asia. It is generally believed that Asian economies are potentially susceptible to ERPT into domestic inflation since they are highly trade-dependent. Particular attention is paid to production sharing-a key characteristic of Asian trade-and its implications for ERPT.