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This paper offers new insights into the nature of exchange rate pass through modelling in the context of a Markov regime-switching environment. Using New Zealand data, the results indicate that pass through to import prices resulting from fluctuations in the exchange rate or exporter costs can be characterised as regime-specific. Furthermore, there is evidence that the probability of switching between higher and lower pass through regimes is significantly influenced by inflation where stabledoi:10.2174/1874915100902010001 fatcat:eirzvwdudnay3b3xzjpdifbjhy