Exchange Rate Pass-Through in the Euro Area

Mariarosaria Comunale and Davor Kunovac ()
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Davor Kunovac: Bank of Finland

No 38, Bank of Lithuania Working Paper Series from Bank of Lithuania

Abstract: In this paper we analyse the exchange rate pass-through (ERPT) in the euro area as a whole and for four euro area members - Germany, France, Italy and Spain. For that purpose we use Bayesian VARs with identification based on a combination of zero and sign restrictions. Our results emphasize that pass-through in the euro area is not constant over time - it may depend on a composition of economic shocks governing the exchange rate. Regarding the relative importance of individual shocks, it seems that pass-through is the strongest when the exchange rate movement is triggered by (relative) monetary policy shocks and the exchange rate shocks. Our shock-dependent measure of ERPT points to a large but volatile pass-through to import prices and overall very small pass-through to consumer inflation in the euro area.

Keywords: Exchange rate pass-through; import prices; consumer prices; in?ation; bayesian vector autoregression. (search for similar items in EconPapers)
JEL-codes: C38 E31 F31 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2017-01-29
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

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Related works:
Working Paper: Exchange rate pass-through in the euro area (2017)
Working Paper: Exchange Rate Pass-Through in the Euro Area (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:lie:wpaper:38

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