Exchange rate pass-through on prices: A regional analysis

We evaluate the pass-through of the exchange rate on the price level in Mexico. We consider the national consumer price index and regional price indexes. The analysis is implemented for the long-and short-run. The results show that the pass-through has decreased at national and regional levels for both time horizons. In the long-run the reduction is similar across regions; in the short-run, however, this is different. While in some regions the transitory effect persists, in others it does not. This suggests that each region exhibits specific socioeconomic characteristics that produce distinct inflationary dynamics.