Exchange Rate Pass‐through

Abstract. The resilience of trade balances of the major industrialized economies to changes in their exchange rates has evoked interest in the exchange rate pass‐through relationship. So far, there has not been a comprehensive survey of this literature. The paper aims to fill this gap in two ways. First, it pieces together the theoretical literature on exchange rate pass‐through. Second, it provides a critical survey of the empirical literature on exchange rate pass‐through. Emphasis is placed on the data and methodology employed in previous work. This is done in order to guide future work in this growing area of research.