Exploring the Effect of Exchange Rate Pass-Through on Import Prices and Domestic Inflation Control Mechanisms
Posted: Mar 16, 2022
Abstract
The relationship between exchange rate fluctuations and domestic price levels represents one of the most complex and consequential channels in international economics. Exchange rate pass-through (ERPT), defined as the percentage change in import prices resulting from a one percent change in the exchange rate, has profound implications for inflation control, monetary policy effectiveness, and economic stability. Traditional economic models have approached this phenomenon through relatively simplistic linear frameworks that fail to capture the intricate, dynamic nature of price transmission mechanisms in contemporary global markets. This research introduces a paradigm shift in ERPT analysis by developing and implementing a novel computational framework that integrates quantum-inspired optimization with deep learning architectures to model the multi-faceted relationships between currency movements, import pricing, and domestic inflation control mechanisms.
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