Monetary Policy Transmission Mechanisms and Inflation in Slovakia
May 1, 2002
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Summary
This paper presents the results of an empirical analysis into monetary policy transmission mechanisms and inflation in the Slovak Republic. The estimated vector autoregression (VAR) model suggests that inflation is determined by changes in foreign prices, the exchange rate, and wage costs, with a modest effect of aggregate demand, in line with theory for small, open economies. Monetary policy is shown to affect inflation via these channels. Changes in money supply seem to have a modest but rapid impact on prices. The measured effect of interest rate changes is modest and gradual, although it appears to have become more important in recent years.
Subject: Currency markets, Exchange rates, Financial markets, Financial services, Foreign exchange, Inflation, Prices, Real exchange rates, Real interest rates
Keywords: channel work, core CPI, Currency markets, exchange rate peg, Exchange rates, inflation, Monetary policy, monetary policy transmission mechanisms, oil price, output gap, price, price level, Real exchange rates, Real interest rates, transition, transmission mechanisms, wage cost, WP
Pages:
27
Volume:
2002
DOI:
Issue:
080
Series:
Working Paper No. 2002/080
Stock No:
WPIEA0802002
ISBN:
9781451850314
ISSN:
1018-5941
