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Journal of Economic Integration 2018 December;33(4) :773-786.
DOI: https://doi.org/10.11130/jei.2018.33.4.773
Globalization and Exchange-Rate Pass-Through in Europe: Is There a Link?
Antonia López-Villavicencio and 
Valérie Mignon 
GATE-CNRS and University Lumière Lyon 2
EconomiX-CNRS, University of Paris Nanterre, and CEPII
Corresponding Author: Valérie Mignon ,Tel: + 33 (0) 1 40 97 58 60, Email: valerie.mignon@parisnanterre.fr
Copyright ©2018 Journal of Economic Integration
ABSTRACT
This paper assesses the impact of globalization on Exchange-Rate Pass-Through into import prices in three core eurozone countries characterized by different degrees of openness. We looked at various indicators of globalization and used data since 1983 to find evidence of a generalized link between globalization and Exchange-Rate Pass-Through. In particular, factors related to trade integration, such as an increase in the import penetration rate or lower trade tariffs, reduce the degree of Exchange-Rate Pass-Through. However, the rising prominence of China in European imports does not contribute to the decline in pass-through. Overall, our findings show that while Exchange-Rate Pass-Through is incomplete, it remains significant even when controlling for the effects of trade globalization.

JEL Classification
E31: Price Level; Inflation; Deflation
F31: Foreign Exchange
F4: Macroeconomic Aspects of International Trade and Finance
C22: Time Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
Keywords: Exchange rate pass-through | Import prices | Globalization | Eurozone
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