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Exchange rate pass-through to import prices: Accounting for changes in the Eurozone trade structure

Valérie Mignon () and Antonia Lopez Villavicencio

No 2019-16, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: This paper assesses whether the emergence of new trading partners (i.e., China and Eastern Europe) as suppliers reduces the exchange rate pass-through (ERPT) in Eurozone countries which differ regarding their external exposure. Using bilateral data on import prices at the two-digit sector level, 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 compelling evidence of a 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. Overall, the trend of liberalization in new players' markets has not altered the competitive environment such as to induce exporters of other countries to absorb exchange rate depreciations.

Keywords: Exchange rate pass-through; import prices; China; Eastern Europe; Eurozone (search for similar items in EconPapers)
JEL-codes: E31 F31 F4 C22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-int and nep-opm
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2019-16

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