The article explores how changes in exchange rates affect prices in an economy. It points out that the impact of exchange rate changes on prices can vary depending on different factors, such as the type of shock the economy experiences and expected monetary policy. The study suggests that current methods used to estimate this impact may not accurately predict inflation, leading to imprecise policy decisions. By using models of small open economies, the researchers show that these factors play a significant role in understanding the relationship between exchange rates and prices.