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Mr. Mark A Horton, Hossein Samiei, Mr. Natan P. Epstein, and Mr. Kevin Ross

depreciation of the Russian ruble over the period has offset changes in the values of most CCA currencies. Accordingly, both nominal and real effective ERs (NEER/REER) have experienced periods of appreciation during the past two years, particularly among CCA energy exporters ( Figure 2 ). Moreover, for many CCA countries, the traditional NEER/REER measures understate the appreciation, as they are based on country trade weights and do not take into account movements in the predominant currency of denomination of imports—the U.S. dollar, which has been appreciating. While in

Mr. Mark A Horton, Hossein Samiei, Mr. Natan P. Epstein, and Mr. Kevin Ross
Since late 2014, exchange rates (ERs) and ER regimes of the Caucasus and Central Asia (CCA) countries have come under strong pressure. This reflects the decline of oil and other commodity prices, weaker growth in Russia and China, depreciation of the Russian ruble, and appreciation of the U.S. dollar, to which CCA currencies have historically been linked. Weaker fiscal and current account balances and increased dollarization have complicated the picture. CCA countries entered this period with closely managed ER regimes and, in many cases, currencies assessed by IMF staff to be overvalued. CCA central banks have price stability as their main policy objective, and most have relied on ER stability to achieve this objective. Thus, the first policy response involved intervention in local foreign exchange (FX) markets, often with limited communication. In this context, the IMF staff has reviewed ER policy advice and implementation strategies for CCA countries.
Mr. Peter J Kunzel, Phil de Imus, Mr. Edward R Gemayel, Risto Herrala, Mr. Alexei P Kireyev, and Farid Talishli

Chapter 1 Background The eight Caucasus and Central Asia (CCA) countries made significant economic progress during the 2000s. Growth was robust, inflation declined, and gains were achieved in building institutions and policy buffers and reducing poverty ( Figure 1 ). However, growth was not broad-based. On the supply side, it was driven largely by oil and gas, mining, remittances, and construction, while on the demand side private consumption and public spending accounted for the bulk of growth. Figure 1. Growth Rates and Inflation Source: IMF

Mr. Peter J Kunzel, Phil De Imus, Mr. Edward R Gemayel, Risto Herrala, Mr. Alexei P Kireyev, and Farid Talishli
The Caucasus and Central Asia (CCA) countries are at an important juncture in their economic transition. Following significant economic progress during the 2000s, recent external shocks have revealed the underlying vulnerabilities of the current growth model. Lower commodity prices, weaker remittances, and slower growth in key trading partners reduced CCA growth, weakened external and fiscal balances, and raised public debt. the financial sector was also hit hard by large foreign exchange losses. while commodity prices have recovered somewhat since late 2014, to boost its economic potential, the region needs to find new growth drivers, diversify away from natural resources, remittances, and public spending, and generate much stronger private sector-led activity.
Mr. Tigran Poghosyan
This paper estimates the extent and speed of exchange rate pass-through (ERPT) in seven Caucasus and Central Asia (CCA) countries using monthly data over the January 1995–May 2020 period. The estimations are performed using the local projections method. We find that the average pass-through in the CCA is about 10 percent on impact and about 25 percent after 12 months. There is no evidence of asymmetric ERPT with respect to the size and the sign of exchange rate changes. The pass-through is broadly unchanged in fixed versus floating exchange rate regimes. There has been a downward shift in the speed of ERPT in the aftermath of the global financial crisis as CCA countries have entered a relatively low inflation environment. The pass-through estimates could be used by the CCA monetary authorities for inflation projections. The absence of non-linearities in the pass-through with respect to the exchange rate regime suggests that transition from fixed to floating exchange rate regimes in the region is not likely to impose additional inflationary costs.