This paper applies Vector Error Correction (VEC) methodology to investigate effects of exchange rate shocks to inflation and price setting processes in Poland, since National Bank of Poland (NBP) have adopted inflation targeting policy and floating exchange rate regime in 1998. The size and the speed of the pass-through at different stage of pricing chain (import prices, producer prices, consumer prices) is measured by impulse response function (IRF). In addition, the relative importance of the exchange rate shocks using forecast errors variance decompositions from the estimated VECM is investigated. The results are interpreted in the context of NBP's conduct of monetary policy, in the prospect of euro area accession.