Such a shock will unavoidably raise inflation, although it usually takes up to a year for the full effect of an exchange rate depreciation to be felt on domestic prices. The questions which macroeconomic policy makers must address are: how much additional inflation should be tolerated? And what can be done to curb the rise in inflation?
José Manuel González-Páramo: The euro money and financial markets – where do we stand? Speech by Mr José Manuel González-Páramo, Member of the Executive Board of the European Central Bank, at the Spanish Capital Markets Forum, Madrid, 24 October 2007.