WHY HAS INFLATION REMAINED SO LOW AFTER THE LARGE EXCHANGE-RATE DEPRECIATIONS OF 1992

This article explains why inflation failed to accelerate in industrial countries after the large exchange rate depreciations of 1992-93. The degree of pass-through from exchange rate changes to inflation is ass umed to depend on the degree of openness of the country, on unutilized capacity at home and abroad, on the price of oil and on the wage, fis cal and monetary policies followed by the country after devaluation. I nflation equations are then estimated for consumer and wholesale price s using pooled data referring to 80 episodes of devaluations/depreciat ions for seven industrial countries during the period 1966-93. The tes ts show that the macroeconomic policy followed by the country signific antly influences the degree of pass-through and that the 1992-93 episo des do not constitute a break with respect to previous devaluation epi sodes when inflation accelerated sharply.