In this section I deal with the first issue – the effects of nominal exchange rate
changes on real exchange rates – in inflation targeting regimes. This question is directly
related to the issue of the “pass-through” from exchange rates to domestic prices, an issue
that have been discussed in great detail in the last few years. Much of the recent
literature on pass-through, however, has ignored this “exchange rate effectiveness”
question, and has focused on the inflationary effects of exchange rate changes