Exchange Rate Pass-Through in the Euro Area
Exchange Rate Pass-Through in the Euro Area

Author(s): Rajmund Mirdala
Subject(s): Economy, Supranational / Global Economy
Published by: ASERS Publishing
Keywords: exchange rate; Euro Area; price; index;
Summary/Abstract: Exchange rate pass-through to domestic prices represents one of the most discussed topics in the recent literature dealing with a wide area of effects associated with exchange rate flexibility. The establishment of the Euro Area and introduction of the euro represent a crucial milestone in the ongoing discussions highlighting positive and negative implications of the nominal exchange rate rigidity. On the other hand, we suggest that it is still convenient to analyze the wide spectrum of effects related to the abortion of the relative flexibility of the national exchange rates after the euro adoption (Barhoumi 2006). Among many of impulses that the exchange rate transmits from the external environment to the domestic market we highlight price related effects associated with sudden changes in the foreign prices and related responsiveness of the domestic price indexes.

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