Exchange rate changes and price dynamics in Poland: an empirical investigation

The aim of this article is to present the influence of exchange rate changes on the price dynamics in Poland. The knowledge concerning exchange rate pass-through to prices allows assessing how exchange rates affect inflation and monetary policy in the country. The article consists of two parts. The first part deals with theoretical analysis of the phenomenon of incomplete exchange rate pass-through to prices, including reasons and factors determining this phenomenon. In the next part the range of exchange rate pass-through to prices in Poland is analyzed by using the vector autoregression (VAR) model.