Exchange Rate Pass-Through and Monetary Policy in Croatia

35 Pages Posted: 31 Jan 2006

See all articles by Andreas Billmeier

Andreas Billmeier

International Monetary Fund (IMF) - Middle East and Central Asia Department

Leo Bonato

International Monetary Fund (IMF)

Date Written: June 2002

Abstract

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.

Keywords: Croatia, pass-through, VAR, inflation, distribution chain, cointegration

JEL Classification: E31, E52, F41

Suggested Citation

Billmeier, Andreas and Bonato, Leo, Exchange Rate Pass-Through and Monetary Policy in Croatia (June 2002). IMF Working Paper, Vol. , pp. 1-35, 2002. Available at SSRN: https://ssrn.com/abstract=879839

Andreas Billmeier (Contact Author)

International Monetary Fund (IMF) - Middle East and Central Asia Department ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Leo Bonato

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States
202 623 6712 (Phone)
202 589 6712 (Fax)

HOME PAGE: http://www.imf.org

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