Exchange rate pass-through in the Netherlands: has it changed?

This study assesses whether the degree of exchange rate pass-through in the Netherlands has changed during the run-up to Economic and Monetary Union. VAR models are estimated on rolling sample periods to show that the pass-through of changes in the guilder-mark exchange rate has increased, while the pass-through of changes in the guilder-pound and guilder-dollar have remained more or less stable. This supports the view that the Netherlands and Germany have become increasingly integrated. This is in contrast to Taylor's ( Economic Review 44 , 1384-408, 2000 ) claim that the decline in inflation has been associated with a significant decline in the degree to which firms pass-through changes in costs. [ABSTRACT FROM AUTHOR]