Janine Aron, John Muellbauer, 16 September 2014

Using aggregate data can bias estimates of exchange rate pass-through by ignoring heterogeneity in price adjustment across sectors. This column uses micro-level price data to estimate pass-through for South Africa, using actual CPI weights to reflect changes in consumption bundles. The result is a micro-based estimate of pass-through with aggregation consistent enough to interest monetary policymakers.

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