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Exchange Rate Pass-Through and Monetary Policy in Croatia
Author:
Mr. Leo Bonato
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and
Mr. Andreas Billmeier null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2002: Issue 109
Language:
English
Publication Date:
01 Jun 2002
DOI:
https://doi.org/10.5089/9781451853223.001
ISBN:
9781451853223
ISSN:
1018-5941
Pages:
34
Keywords:
WP; retail price index; Croatia; pass-through; VAR; inflation; distribution chain; cointegration; price level; exchange rate movement; time series; exchange rate appreciation; HWWA commodity price index; exchange rate shock; DM exchange rate; Exchange rates; Price indexes; Exchange rate adjustments; Vector autoregression
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Exchange rate targeting is considered the best policy option in dollarized economies when wages and prices are indexed to the exchange rate. Croatia is a highly dollarized economy, but empirical investigation conducted in this paper shows that exchange rate pass-through has been low after stabilization. This finding, which is robust to different methodologies (VAR, cointegration), would suggest that dollarization is mostly limited to financial assets and therefore that strict exchange rate targeting may not necessarily be the best option. However, policy implications are unclear due to the endogeneity of the pass-through to the policy regime.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund