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Exchange-Rate Pass-Through to Import Prices in the Euro Area

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Author Info
José Manuel Campa
Linda S. Goldberg
José M. González-Mínguez

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Abstract

This paper presents an empirical analysis of transmission rates from exchange rate movements to import prices, across countries and product categories, in the euro area over the last fifteen years. Our results show that the transmission of exchange rate changes to import prices in the short run is high, although incomplete, and that it differs across industries and countries; in the long run, exchange rate pass-through is higher and close to one. We find no strong statistical evidence that the introduction of the euro caused a structural change in this transmission. Although estimated point elasticities seem to have declined since the introduction of the euro, we find little evidence of a structural break in the transmission of exchange rate movements except in the case of some manufacturing industries. And since the euro was introduced, industries producing differentiated goods have been more likely to experience reduced rates of exchange rate pass-through to import prices. Exchange rate changes continue to lead to large changes in import prices across euro-area countries.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11632.

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Date of creation: Sep 2005
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Handle: RePEc:nbr:nberwo:11632

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F3 - International Economics - - International Finance
F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  6. Charles Engel, 2006. "Equivalence Results for Optimal Pass-Through, Optimal Indexing to Exchange Rates, and Optimal Choice of Currency for Export Pricing," Journal of the European Economic Association, MIT Press, vol. 4(6), pages 1249-1260, December. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Linda S. Goldberg, 2005. "Trade invoicing in the accession countries: are they suited to the Euro?," Staff Reports 222, Federal Reserve Bank of New York. [Downloadable!]
    Other versions:
  2. Alistair Dieppe & Thomas Warmedinger, 2007. "Modelling intra- and extra-area trade substitution and exchange rate pass-through in the euro area," Working Paper Series 760, European Central Bank. [Downloadable!]
  3. Óscar J. Arce & David López-Salido, 2006. "House Prices, Rents, and Interest Rates under Collateral Constraints," Banco de España Working Papers 0610, Banco de España. [Downloadable!]
  4. Tommaso Mancini Griffoli, 2006. "Explaining the Euro's Effect on Trade? Interest Rates in an Augmented Gravity Equation," HEI Working Papers 10-2006, Economics Section, The Graduate Institute of International Studies. [Downloadable!]
  5. de Bandt, Olivier & Banerjee, Anindya & Kozluk, Tomasz, 2007. "Measuring Long-Run Exchange Rate Pass-Through," Economics Discussion Papers 2007-32, Kiel Institute for the World Economy. [Downloadable!]
    Other versions:
  6. Forte, Antonio, 2009. "The pass-through effect: a twofold analysis," MPRA Paper 16527, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  7. Abo-Zaid, Salem, 2009. "Sticky Wages, Incomplete Pass-Through and Inflation Targeting: What is the Right Index to Target?," MPRA Paper 13177, University Library of Munich, Germany. [Downloadable!]
  8. Ramón María-Dolores, 2008. "Exchange rate pass-through in new Member States and candidate countries of the EU," Banco de España Working Papers 0822, Banco de España. [Downloadable!]
  9. Wolfram Berger & Helmut Wagner, 2006. "International Policy Coordination and Simple Monetary Policy Rules," IMF Working Papers 06/164, International Monetary Fund. [Downloadable!]
  10. Elke Hahn, 2007. "The impact exchange rate shocks on sectoral activity and prices in the euro area," Working Paper Series 796, European Central Bank. [Downloadable!]
  11. Haroon Mumtaz & Özlem Oomen & Jian Wang, . "Exchange rate pass-through into UK import prices," Bank of England working papers 312, Bank of England. [Downloadable!]
  12. Michele Ca’ Zorzi & Elke Hahn & Marcelo Sánchez, 2007. "Exchange rate pass-through in emerging markets," Working Paper Series 739, European Central Bank. [Downloadable!]
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  13. Roberto Álvarez & Patricio Jaramillo & Jorge Selaive, 2008. "Exchange Rate Pass-Through into Import Prices: The Case of Chile," Working Papers Central Bank of Chile 465, Central Bank of Chile. [Downloadable!]
  14. Paloma López-García & Sergio Puente, 2006. "Business demography in Spain: determinants of firm survival," Banco de España Working Papers 0608, Banco de España. [Downloadable!]
  15. Linda Goldberg & Cedric Tille, 2006. "The internationalization of the dollar and trade balance adjustment," Staff Reports 255, Federal Reserve Bank of New York. [Downloadable!]
  16. Linda S. Goldberg & Cédric Tille, 2006. "The International Role of the Dollar and Trade Balance Adjustment," NBER Working Papers 12495, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  17. Francisco de Castro & Pablo Hernández de Cos, 2006. "The economic effects of exogenous fiscal shocks in Spain: a SVAR approach," Banco de España Working Papers 0604, Banco de España. [Downloadable!]
    Other versions:
  18. Manoj Atolia, 2002. "Trade Liberalization and Rising Wage Inequality in Latin America: Reconciliation with HOS Theory," Working Papers wp2002_03_01, Department of Economics, Florida State University, revised Feb 2006. [Downloadable!]
    Other versions:
  19. Takatoshi Ito & Kiyotaka Sato, 2006. "Exchange Rate Changes and Inflation in Post-Crisis Asian Economies: VAR Analysis of the Exchange Rate Pass-Through," NBER Working Papers 12395, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  20. Campa, Jose M. & Gonzalez, Jose M. & Sebastia, Maria, 2008. "Non-linear adjustment of import prices in the European Union," IESE Research Papers D/734, IESE Business School. [Downloadable!]
  21. Mario Izquierdo & Aitor Lacuesta, 2006. "Wage inequality in Spain: recent developments," Banco de España Working Papers 0615, Banco de España. [Downloadable!]
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