Exchange Rate Pass-Through and the Welfare Effects of the Euro

By Mick Devereux, Charles M. Engel, C. Tille. 2003

134 citations recorded by the source corpus.

This article explores the implications of the European single currency within a simple sticky price intertemporal model. We focus on the question of how the euro may change the sensitivity of consumer prices in Europe to exchange-rate changes. Our central conjecture is that the acceptance of the euro will lead European prices to become more insulated from exchange-rate volatility. We find that this affects both the volatility and levels of macroeconomic aggregates in both the U.S. and Europe. We find that European welfare is enhanced, and the U.S. shares in Europe's good fortune.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/969ff5683b56d8d2dc54a8eef0166827138f098c

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Citations in the corpus

Multi-Product Firms and Exchange Rate Fluctuations (2013, unknown): “ln (1 +NUMPRODjct) = μjc + φ(t) + β0 ln (RERct) + (16)”
Exchange Rate Pass-Through, Exchange Rate Volatility, and Exchange Rate Disconnect (2002, unknown): “18 To derive the optimal pricing conditions, see Devereux et al. (1999) .”
The Sensitivity of the CPI to Exchange Rates: Distribution Margins, Imported Inputs, and Trade Exposure (2010, background): “Devereux et al. (2003) and Devereux and Engel (2002) gave the distributor power to reprice imported goods, resulting in imported goods prices that were sticky in the consumer’s currency and consistent with prevalent local currency pricing.”