Exchange rate regimes have witnessed increasing attention over the past century due to their crucial role in maintaining macroeconomic stability, controlling inflation, and stabilizing exchange rates. This paper seeks to address an empirical gap in understanding exchange rate pass-through (ERPT) in emerging markets and provide evidence-based recommendations for monetary policy in three economies. The study examines the dynamics of ERPT in three North African countries—Tunisia, Morocco, and Jordan—over the period from 2006 to 2020. It employs a Vector Autoregressive (VAR) model and a Vector Error Correction Model (VECM) to analyze these relationships. Additionally, the Granger causality test is used to identify the direction of causality among the variables. This study finds that ERPT to inflation is low and incomplete in Morocco, Tunisia, and Jordan, suggesting that these economies can adopt more flexible exchange rate regimes without triggering significant inflationary pressures. The research contributes to the literature by highlighting the role of subsidies, import structures, and fiscal policy in shaping ERPT dynamics, while offering policy insights on inflation targeting, debt management, and subsidy reform in emerging markets.

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Keywords

Exchange rate pass-through, Inflation, Monetary policy, Granger Causality, inflation targeting