More research needed on exchange rate pass-through, ECB article says

Research on effects of different shocks on inflation “still in an incipient phase”

ecb-frankfurt-new
The European Central Bank, Frankfurt

Research into how movements in exchange rates affect inflation needs to become more sophisticated, an article published by the European Central Bank argues.

Exchange rate pass-through is "crucial for conducting monetary policy effectively", argues the article, which has been released before its publication in the ECB's forthcoming economic bulletin. But most current literature struggles to explain the phenomenon.

Models do agree that pass-through has declined for the eurozone, the paper says

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