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Exchange rate pass-through to import prices: accounting for changes in the eurozone trade structure

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  • Antonia López-Villavicencio

    (University of Paris Nanterre)

  • Valérie Mignon

    (University of Paris Nanterre
    International Macroeconomics and Finance Research Group)

Abstract

This paper assesses the effect of the emergence of new trading partners (i.e., China and Eastern Europe) on the exchange rate pass-through (ERPT) to import prices in eurozone countries. To this end, we rely on bilateral data on imports of manufactured goods at the two-digit sector level over the 2000–2018 period. We find that (i) pass-through is complete in many cases, (ii) ERPT from China is higher than from the United States, and (iii) there is no generalized link between ERPT and the increasing integration of some emerging markets in European imports. We also show that the launch of the single currency has not provoked a sufficient change in the part of trade exposed to exchange rate fluctuations and, therefore, has not affected the pass-through.

Suggested Citation

  • Antonia López-Villavicencio & Valérie Mignon, 2020. "Exchange rate pass-through to import prices: accounting for changes in the eurozone trade structure," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(4), pages 835-858, November.
    • Handle: RePEc:spr:weltar:v:156:y:2020:i:4:d:10.1007_s10290-020-00382-2
    DOI: 10.1007/s10290-020-00382-2
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    2. Wang, Yonglian & Wang, Lijun & Pan, Changchun & Hong, Songzhi, 2022. "Economic policy uncertainty and price pass-through effect of exchange rate in China," Pacific-Basin Finance Journal, Elsevier, vol. 75(C).

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    More about this item

    Keywords

    Exchange rate pass-through; Import prices; China; Eastern Europe; Eurozone;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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