Recent estimates of exchange rate pass-through to import prices in the euro area

Abstract

This paper provides an update on the exchange rate pass-through (ERPT) estimates for 12 euro area (EA) countries. First, based on quarterly data over the 1990-2012 period, our study does not find a significant heterogeneity in the degree of pass-through across the monetary union members, in contrast to previous empirical studies. As we use a longer time span for the post-EA era than existing studies, this is not surprising, since the process of monetary union has entailed some convergence towards more stable macroeconomic conditions across euro area (EA) member states. Second, when assessing the stability of passthrough elasticities, we find very weak evidence of a decline around the inception of the euro in 1999. However, our results reveal that a downtrend in ERPT estimates became apparent starting from the beginning of the 1990s. This observed decline was synchronous to the shift towards reduced inflation regimes in our sample of countries. Finally, we notice that the distinction between "peripheral" and "core" EA economies in terms of pass-through has significantly decreased over the last two decades.

Investigating first‐stage exchange rate pass‐through: Sectoral and macro evidence from euro area countries

“…We point out that import‐price pass‐through elasticities are in some extent heterogeneous across our sample of EA countries. This pattern is in line with the recent literature on ERPT in the currency union members (see, e.g., Ben Cheikh & Rault, ).…”

Macroeconomics Determinants of Exchange Rate Pass-Through: New Evidence from the Asia-Pacific Region

“…Thus, it would be more appropriate to investigate the long-run ERPT using an error correction model or an dynamic OLS (Ghosh and Rajan, 2009;Yanamandra, 2015). However, several scholars fail to document the long-run link (Ben Cheikh and Rault 2016;Campa and Goldberg 2005;Kilic 2015). In cases of a relationship with no cointegration, to consider the long-run impact of exchange rate movements on the price level, it is possible to apply the ADRL to the analysis.…”

“…Exporters may follow an LCP setting if they perceive a stable macroeconomic environment in the destination country, and ERPT will be lower. However, in instable economic conditions, the PCP strategy will be perfect, and hence ERPT will be larger (Ben Cheikh and Rault 2016).…”

Research on exchange rate pass‐through effect based on artificial intelligence approach

“…For a certain threshold, the change in economic development will increase the level of passthrough ratio. Cheikh and Rault argued that there is a threshold effect for spreads and exchange rates. Winkelried suggested that the stable and low‐inflation economic environment may impair the portion of price adjustment caused by exchange rate volatility.…”