- 22 December 2021
- WORKING PAPER SERIES - No. 2634Details
- We study exchange rate pass-through (ERPT), i.e., the impact of exchange rate movements on inﬂation, focusing on euro area import prices at a sectorally disaggregated level. Our estimation strategy is based on VAR-X models, thus incorporating both endogenous and exogenous explanatory variables. The impulse response functions not only allow to study the extent but also the dynamics of ERPT. We ﬁnd that ERPT is heterogeneous in terms of magnitude across sectors. We further investigate what industry-speciﬁc characteristics aﬀect the heterogeneity of ERPT. Across various model speciﬁcations including import penetration, market integration, competition and value chain integration, we ﬁnd that higher market concentration and higher backward integration in global value chains decrease pass-through, in line with previous ﬁndings in the literature.
- JEL Code
- C50 : Mathematical and Quantitative Methods→Econometric Modeling→General
F30 : International Economics→International Finance→General
F40 : International Economics→Macroeconomic Aspects of International Trade and Finance→General