Chai-anant, et al. (2008) examined the impact of the exchange rate as a transmission
mechanism to mitigate inflationary pressure caused by monetary policy under inflation
targeting. They constructed a small structure model of the economy. The model postulated a
relationship among macroeconomic variables within a simple and tractable framework. An
element of dynamic stochastic general equilibrium with rational expectation was also added to
examine the role of exchange rate. In that model, the degree of pass-through was calculated,
revealing that it was incomplete through the import price channel.