The Exchange Rate Pass-Through in the New EU Member States

47 Pages Posted: 19 Aug 2011

Multiple version iconThere are 2 versions of this paper

Date Written: August 1, 2011

Abstract

This paper aims to complete our understanding of the relationship between changes in nominal effective exchange rates and prices in the new EU member states. We investigate the exchange rate pass-through to import, producer and consumer prices for ten Central and Eastern European countries with quarterly data from January 1996 to June 2010. In a first step, the pass-through estimates are derived from a dynamic panel data model, through the generalized method of moments. A statistically significant exchange rate pass-through to import prices is found, while no statistically significant exchange rate pass-through is estimated to consumer and producer prices. We further investigate whether exchange-rate pass-through estimates have declined in response to a change in inflation environment and find evidence of such decline only for import prices, both in the short run and the long run. In a second step, we proceed to an individual analysis, country by country, and find support for an increased heterogeneity in the exchange rate pass-through estimates. We equally test for the stability of the estimated.

Keywords: inflation and prices, exchange rate pass-through, international topics, GMM

JEL Classification: C33, E31, E42, E52, F31, O52

Suggested Citation

Jimborean, Ramona, The Exchange Rate Pass-Through in the New EU Member States (August 1, 2011). Banque de France Working Paper No. 341, Available at SSRN: https://ssrn.com/abstract=1911904 or http://dx.doi.org/10.2139/ssrn.1911904

Ramona Jimborean (Contact Author)

Banque de France ( email )

Paris
France

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