Exchange rate changes impact import prices, affecting economies and consumers.
The article examines how changes in exchange rates affect the prices of imports from the euro area in certain European countries. The researchers analyzed data on import prices for different products and used two methods to estimate how much of the exchange rate change is passed on to consumers. They found that most countries did not fully pass on exchange rate changes to import prices, except for Slovenia and Cyprus. The pass-through rates varied from 0.090 to 2.916 in the short term and from 0.102 to 2.242 in the long term. Importantly, the manufacturing sectors showed the lowest pass-through rates, indicating a decrease in pass-through along the pricing chain and a high reliance on imported inputs in these economies.