1. Exchange rate pass-through to import prices: Accounting for changes in the Eurozone trade structure
- Author:
- Valérie Mignon and Antonia Lopez-Villavicencio
- Publication Date:
- 06-2019
- Content Type:
- Working Paper
- Institution:
- Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
- Abstract:
- This paper assesses whether the emergence of new trading partners (i.e., China and Eastern Europe) as suppliers reduces the exchange rate pass-through (ERPT) in Eurozone countries which differ regarding their external exposure. Using bilateral data on import prices at the two-digit sector level, we find that (i) pass-through is complete in many cases, (ii) ERPT from China is higher than from the United States, and (iii) there is no compelling evidence of a generalized link between ERPT and the increasing integration of some emerging markets in European imports. We also show that the launch of the single currency has not provoked a sufficient change in the part of trade exposed to exchange rate fluctuations and, therefore, has not affected the pass-through. Overall, the trend of liberalization in new players' markets has not altered the competitive environment such as to induce exporters of other countries to absorb exchange rate depreciations.
- Topic:
- Economics, International Political Economy, International Trade and Finance, Exchange Rate Policy, Eurozone, Trade, and Imports
- Political Geography:
- China, Europe, and Eastern Europe