How does a euro/dollar exchange rate shock affect inflation in France?

Louis de CHARSONVILLE and Caroline Jardet

Rue de la Banque, 2018, issue 68

Abstract: In this paper, we analyse the impact of an exchange rate shock on inflation in France using the Model for Analysis and Projection of Inflation (MAPI) of the Banque de France (see Working Paper, No. 637). We show that the depreciation of the euro between 2014 and 2016 led to a rise in inflation of around 0.3 percentage point in 2015, before taking into account second-round effects, mainly via the impact of oil prices in euros on the energy component of inflation. Conversely, the appreciation of the euro in early 2017 contributed to reducing inflation by 0.1 percentage point in 2017. However, the impact on inflation excluding energy and food is more diffused.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:rueban:2018:68

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