Exchange Rate Pass-Through to Domestic Prices

Paul Reddan and Jonathan Rice
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Paul Reddan: Central Bank of Ireland

No 08/EL/17, Economic Letters from Central Bank of Ireland

Abstract: Even by euro area standards, Irish goods inflation remained very weak throughout 2016. This Letter provides empirical evidence that Irish consumer goods price inflation is particularly exposed to movements in the euro-sterling exchange rate - notwithstanding factors such as global prices, interest rates and domestic consumption. This exposure of Irish consumer prices to sterling currency movements is shown to closely explain price dynamics throughout 2016, in particular for the period following the British vote to leave the EU.

Date: 2017-07
New Economics Papers: this item is included in nep-int and nep-mon
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