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Exchange rate uncertainty and import prices in the euro area

Boris Blagov

No 789, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: This paper analyses the effects of exchange rate uncertainty on the pricing behaviour of import firms in the euro area. Uncertainty is measured via the volatility of the structural shocks to the exchange rate in a non-linear VAR framework and is an important determinant of import prices. An increase in exchange rate uncertainty is associated with a fall in prices on average, which suggests that the exchange rate risk is borne by the importers. The analysis utilizes a dataset on industrial import prices, disaggregated by origin of imports. Controlling for intra- and extra-euro area trade is important.

Keywords: exchange rate uncertainty; exchange rate pass-through; non-linearities; import price inflation; extra-euro area trade (search for similar items in EconPapers)
JEL-codes: C11 C22 F31 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-eec, nep-int and nep-opm
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Journal Article: Exchange rate uncertainty and import prices in the euro area (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:789

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