Exchange-Rate Pass-Through to Import Prices in the Euro Area

University of Navarra Working Paper No. 609

31 Pages Posted: 8 Feb 2006

See all articles by José Manuel Campa

José Manuel Campa

University of Navarra - Madrid Campus - IESE Business School; National Bureau of Economic Research (NBER)

Multiple version iconThere are 4 versions of this paper

Date Written: September 2005

Abstract

This paper presents an empirical analysis of transmission rates from exchange rate movements to import prices, across countries and product categories, in the euro area over the last fifteen years. Our results show that the transmission of exchange rate changes to import prices in the short run is high, although incomplete, and that it differs across industries and countries; in the long run, exchange rate pass-through is higher and close to one. We find no strong statistical evidence that the introduction of the euro caused a structural change in this transmission. Although estimated point elasticities seem to have declined since the introduction of the euro, we find little evidence of a structural break in the transmission of exchange rate movements except in the case of some manufacturing industries. And since the euro was introduced, industries producing differentiated goods have been more likely to experience reduced rates of exchange rate pass-through to import prices. Exchange rate changes continue to lead to large changes in import prices across euro-area countries.

Keywords: currency, invoicing, pass-through, exange rate, producer currency pricing, local currency pricing

Suggested Citation

Campa, José Manuel, Exchange-Rate Pass-Through to Import Prices in the Euro Area (September 2005). University of Navarra Working Paper No. 609. Available at SSRN: https://ssrn.com/abstract=881739 or http://dx.doi.org/10.2139/ssrn.881739

José Manuel Campa (Contact Author)

University of Navarra - Madrid Campus - IESE Business School ( email )

Camino del Cerro del Aguila 3
Madrid, 28023
Spain
+34 91 357 0809 (Phone)
+34 91 357 2913 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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