Pass-through of external shocks along the pricing chain: A panel estimation approach for the euro area



Abstract:

In this paper we analyse in a mark-up framework the pass-through of commodity price
and exchange rate shocks to the main components of producer and consumer prices.
Thereby we link movements in prices at the different production stages as firms set their
prices as a mark-up over production costs. The empirical results reveal significant
linkages between different price stages in the euro area. The overall results are roughly
in line with the literature and provide insight into the effects at different stages of the
production chain. Non-energy commodity prices turn out to be important determinants
of euro area prices.

Keywords: Pass-through, producer prices, consumer prices, commodity prices, exchange
rate

JEL Codes: E31, E37

ECB

Working Paper Series No 1104

November 2009



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