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Exchange Rate Pass-Through and Monetary Policy in Croatia

Author/Editor: Billmeier, Andreas | Bonato, Leo
Authorized for Distribution: June 1, 2002
Electronic Access: Free Full Text (PDF file size is 1,077KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: 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.
 
Series: Working Paper No. 02/109
Subject(s): Exchange rate management | Croatia | Monetary policy | Inflation
Author's keyword(s): Croatia | pass-through | AR | inflation | distribution chain | cointegration
 
English  
    Published:   June 1, 2002        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA1092002   Pages:   34
    Price:   US$15.00
       
     
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