Pass-through effect of exchange rate to domestic prices; An Application on the fragile five

The transmission of exchange rate changes to domestic selling prices through import prices is defined as the transition effect. The aim of this study is to analyze the pass-through effect in the Fragile Five countries. In this context, the causality relationships between the nominal effective exchange rate, oil prices and interest rate variables and inflation in Brazil, Indonesia, South Africa, India and Turkey are analyzed for the period 2007:Q4-2021:Q4. Within the scope of the analysis, Extended Dickey-Fuller (ADF), Phillips Perron (PP) unit root tests and Lee-Strazicich (2003) unit root test with structural break are applied to the variables. Then, the Rolling Window Test developed by Balcılar et al. (2010) is used to reveal the causality relationships between the variables. In the study, the relationship between the interest rate, oil prices and nominal effective exchange rate variables and inflation is analyzed separately. It is thought that conducting the study with these variables and the Sliding Windows causality test will contribute to the economic literature. According to the findings of the study, the variables that affect inflation the most are interest rate in Brazil and Turkey, nominal exchange rate and interest rate in South Africa and Indonesia, and nominal exchange rate in India.