When the dollar hits the dinner table:
Why food inflation in non-euro EU countries is mostly imported
Tibor Bareith and Imre Fertő
Food inflation is where macroeconomics becomes painfully personal.
Households may not follow bond yields or central bank speeches. But they notice immediately when bread, milk, cooking oil, and vegetables become more expensive. Food prices are among the most visible parts of inflation, and among the hardest to avoid.
That is why food inflation has become such a politically charged issue across Europe in recent years. The pandemic disrupted supply chains. Energy prices surged. Russia’s war against Ukraine sent new shocks through agricultural and commodity markets. For many households, the cost-of-living crisis arrived first through the supermarket checkout.
But what is actually driving these price increases?
The usual answer is domestic monetary policy: too much liquidity, too much demand, too little restraint. Our research suggests that for EU countries outside the euro area, this explanation is incomplete. Food inflation in these economies appears to be driven less by domestic monetary conditions than by exchange-rate movements and global shocks. In particular, depreciation against the US dollar plays a central role.
Food inflation is not purely a domestic story
In public debate, inflation is often treated as if it were mainly homemade.
That may be too narrow a view for small open economies. Food prices are shaped by imported energy, fertilisers, transport costs, internationally traded agricultural commodities, and exchange-rate fluctuations. When currencies weaken, these pressures intensify.
This matters especially in non-euro EU countries. These economies are deeply integrated into the European single market, but they retain national currencies. That creates a distinctive combination: openness to common European and global shocks, but continued exposure to exchange-rate volatility.
To examine this issue, the paper analyses seven EU member states outside the euro area — Bulgaria, the Czech Republic, Denmark, Hungary, Poland, Romania, and Sweden — using monthly data from 2007 to 2023. The sample spans the global financial crisis, post-crisis normalisation, the COVID-19 period, and the geopolitical shocks following Russia’s invasion of Ukraine.
The dollar matters more than many would expect
The central empirical result is straightforward.
Depreciation against the US dollar has a strong and persistent effect on food prices. When domestic currencies lose value against the dollar, food inflation rises. By contrast, the euro exchange rate is not statistically significant in the baseline results once common shocks are taken into account.
This may seem surprising at first glance. These are European economies trading heavily inside Europe.
Why should the dollar matter more than the euro?
The answer lies in how global pricing works. Many commodities relevant for food systems — especially energy and internationally traded agricultural inputs — are still priced directly or indirectly in dollars. As a result, even in Europe, dollar strength can feed into domestic food prices through import costs and supply-chain channels.
In that sense, food inflation in non-euro EU countries is partly imported inflation. It is transmitted through the exchange rate, not generated only by domestic overheating.
A common shock, but not a common response
One reason this question is difficult is that countries do not react in the same way.
They face common shocks, but differ in trade exposure, exchange-rate arrangements, domestic market structures, and policy frameworks. A standard panel model can easily flatten these differences.
To address that, the study uses a CS-ARDL framework, which allows for both shared international shocks and heterogeneous national responses. The data strongly justify this choice: the paper finds substantial cross-sectional dependence and slope heterogeneity across countries. In other words, these economies move together, but not identically.
That point is worth stressing. Food inflation in non-euro Europe is not a one-size-fits-all process. But the underlying vulnerability to external shocks is common.
Bad news travels faster than good news
The paper also finds that exchange-rate pass-through is asymmetric.
Depreciation raises food prices more strongly than appreciation lowers them. When a currency weakens, food prices move up quickly. When the currency strengthens again, prices do not fall back by the same amount.
This is economically intuitive and politically important.
Firms often pass higher costs on rapidly, but reverse them only partially or slowly. Menu costs, contract rigidities, strategic pricing, and supply-chain frictions all help explain why price increases are easier to transmit than price decreases.
For households, the implication is clear: even temporary shocks can have lasting effects on the grocery bill.
What about domestic monetary policy?
Here the paper’s message is more restrained, but still important.
Domestic monetary proxies — including the monetary base and short-term money market rates in robustness checks — show only weak and unstable relationships with food inflation once exchange rates, general inflation, and common shocks are controlled for.
This does not mean central banks do not matter.
They clearly do. Monetary policy influences aggregate demand, inflation expectations, and macroeconomic credibility. But the results suggest that when it comes specifically to food inflation in these non-euro EU countries, domestic monetary conditions are not the main story.
The dominant drivers are external: exchange-rate movements and global price shocks.
That is a useful corrective to policy debates that frame food inflation mainly as the result of domestic policy mistakes.
The policy lesson: stabilise, but also adapt
What follows from these findings?
First, exchange-rate stability matters. In small open economies, currency depreciation can quickly become a cost-of-living problem. Exchange-rate volatility is not just a financial issue. It affects household welfare directly through food prices.
Second, resilience matters. If food inflation is transmitted through global shocks, then policy cannot rely only on interest rates or liquidity restraint. It also needs to address structural vulnerability: food supply chains, energy dependence, import exposure, and the capacity to absorb external disturbances.
Third, policy coordination matters. Food inflation sits at the intersection of macroeconomics, trade, energy, agriculture, and geopolitics. Treating it as a narrowly monetary problem risks misdiagnosing the source of the pressure.
A wider lesson for Europe
The broader message goes beyond food prices.
Non-euro EU countries occupy a distinctive position inside the Union. They benefit from market integration but remain exposed to currency movements. That autonomy can be useful, but it also creates an additional transmission channel for global shocks.
In calm periods, this may not attract much attention. In turbulent periods, it becomes central.
That is why inflation analysis in Europe needs a more external perspective. Not all inflation is domestically generated. Not all price pressures can be managed through domestic monetary tools alone. And not all food inflation should be read as evidence of excessive domestic demand.
For households, inflation shows up in the shopping basket.
For policymakers, the challenge is to look beyond it.
Because in non-euro EU countries, the price of dinner may depend as much on the dollar and global shocks as on anything decided at home.
Bareith, T., & Fertő, I. (2026). Monetary policy, exchange rates and food price dynamics: navigating heterogeneity in non-Eurozone countries. British Food Journal, 1-17. https://doi.org/10.1108/BFJ-07-2025-0975
