Monetary Transmission Mechanisms in Belarus

Rodolfo Maino and Balázs Horváth

No 2006/246, IMF Working Papers from International Monetary Fund

Abstract: We explore monetary policy transmission by estimating VAR impulse response functions to illustrate the Belarusian economy's response to unexpected changes in policy and exogenous variables. We find a significant exchange rate pass-through to prices, and interest rate policy following, rather than leading, financial market developments. Our estimated monetary policy reaction function shows the central bank striking a balance between real exchange rate stability and containing inflation. We discuss dollarization, administrative interventions, and other features complicating monetary policy transmission, review specific constraints and vulnerabilities, and conclude with observations on possible measures that could raise the effectiveness of monetary policy in Belarus.

Keywords: WP; exchange rate; monetary policy; interest rate; banking system; inflation; transmission mechanisms; dollarization.; central bank; foreign exchange; monetary policy effectiveness; monetary policy implementation; interest rate channel; monetary management; exchange rate expectation; monetary policy formulation; monetary policy transmission channels; monetary policy action; NBRB's monetary policy strategy; vis-à-vis U.S. dollar; Exchange rates; Real exchange rates; Dollarization; Currencies; Southeast Asia (search for similar items in EconPapers)
Pages: 22
Date: 2006-11-01
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Citations: View citations in EconPapers (10)

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