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Differences in exchange rate pass-through in the euro area

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  • Campa, Jose Manuel
  • Gonzalez Minguez, Jose M.

Abstract

This paper focuses on the pass-through of exchange rate changes into the prices of imports made by euro area countries originating outside the area. Using data on import unit values for thirteen different product categories for each country, we estimate industry-specific rates of pass-through across and within countries for all euro members. In the short-run, pass-through rates differ across industries and countries and are less than one. In the longrun neither full pass-through nor equality of pass-through rates across industries and countries can be rejected. Differences exist across euro area countries in the degree that a common exchange rate movement gets transmitted into consumer prices and costs of production indices. Most of these differences in transmission rates are due to the distinct degree of openness of each country to non-euro area imports rather than to the heterogeneity in the structure of imports.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 50 (2006)
Issue (Month): 1 (January)
Pages: 121-145

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Handle: RePEc:eee:eecrev:v:50:y:2006:i:1:p:121-145

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