This paper explores the role of trade integrationor opennessfor monetary policy transmission in a medium-scale New Keynesian model. Allowing for strategic complementarities in price-setting, we highlight a new dimension of the exchange rate channel by which monetary policy directly impacts...

The degree of exchange rate pass-through to domestic goods prices has important implications for monetary policy in small open economies with floating exchange rates. Evidence indicates that pass-through is faster to import prices than to consumer prices. Price setting behaviour in the...

Relying on a novel dataset of detailed micro-data on import prices, this paper explores the close link that exists between nominal import price rigidity and the extent of exchange rate pass-through (ERPT). We show that previous evidence in favor of incomplete and low value of ERPT in the...

We empirically investigate how various economic factors affect the changes in the pricing policies of exporters, in particular changes in the exchange rate pass-through. Assuming exporters set prices following either a high or a low pass-through pricing policy, and assuming that the transition...

It has been widely documented that the exchange rate pass-through to domestic inflation has decreased significantly in most of the industrialized world. As microeconomic factors cannot completely explain such a widespread phenomenon, a macroeconomic explanation linked to the inflationary...

Studies on the relationship between exchange rates and traded goods prices typically find evidence of incomplete pass-through, usually explained by pricing-to-market behaviour. Although economic theory predicts that incomplete pass-through may also be linked to the presence of non-tariff...

In this paper, we first document that two predictions of the heterogeneous firm version of the Dornbusch (1987) pricing model are confirmed in micro data on US import prices: while the rate at which a firm reacts to changes in its own cost is U-shaped in market share, the rate at which it reacts...

This paper examines the presence of nonlinear mechanism in the exchange rate pass-through (ERPT) to CPI inflation for 12 euro area (EA) countries. Using logistic smooth transition models, we explore the existence of nonlinearity with respect to economic activity along the business cycle. Our...

This paper examines the extent and evolution of exchange rate pass-through (ERPT) using panel cointegration approach. For 27 OECD countries, we provide a strong evidence of incomplete ERPT in sample of 27 OECD countries. Both FM-OLS and DOLS estimators show that pass-through elasticity does not...

This paper investigates whether the exchange rate pass-through (ERPT) to CPI inflation is a nonlinear phenomenon for five heavily indebted euro area (EA) countries, namely the so-called GIIPS group (Greece, Ireland, Italy, Portugal, and Spain). Using logistic smooth transition models, we explore...