Exchange Rate Pass-Through to Consumer Prices: A European Perspective

31 Pages Posted: 28 Mar 2002

See all articles by Felix P. Hüfner

Felix P. Hüfner

Organization for Economic Co-Operation and Development (OECD)

Michael Schröder

affiliation not provided to SSRN

Date Written: March 2002

Abstract

We study the pass-through of exchange rate changes to consumer prices for the euro area by estimating vector error correction models for Germany, France, Italy, the Netherlands and Spain. Using the weights of the Harmonized Index of Consumer Prices (HICP) we compute a weighted average of the country results for the euro area. We find that in response to a ten percent depreciation of the euro nominal effective exchange rate index, the HICP tends to increase by 0,4 percent after 12 months. The total effect amounts to 0,8 percent and the adjustment of consumer prices is completed after three years.

Keywords: pass-through, inflation, exchange rate, euro area

JEL Classification: E31, F31, F41

Suggested Citation

Hüfner, Felix P. and Schröder, Michael, Exchange Rate Pass-Through to Consumer Prices: A European Perspective (March 2002). ZEW Working Paper No. 02-20, Available at SSRN: https://ssrn.com/abstract=304939 or http://dx.doi.org/10.2139/ssrn.304939

Felix P. Hüfner

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Michael Schröder (Contact Author)

affiliation not provided to SSRN

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