Real exchange rate changes - resulting either from shifts in nominal exchange rates or increases in costs that are asymmetric across countries - are the primary focus of this text. The book shows how exchange rates and local production costs are passed through into import prices. It is found both analytically and empirically for OECD countries that pass-through is incomplete and the degree of pass-through depends on country and industry characteristics such as production share, market structure, product attributes and demand features. The book also investigates the implications of exchange...