Exchange Rate Policy and Inflation in Acceding Countries: The Role of Pass-through

Fabrizio Coricelli (), Bostjan Jazbec () and Igor Masten

William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan Stephen M. Ross Business School

Abstract: This paper analyzes the link between the choice of exchange rate regime and inflationary performance in four acceding countries to the EU: the Czech Republic, Hungary, Poland and Slovenia. The results allow a clear ranking of countries according to the size of the pass-through effect and the importance of exchange rate shocks to overall inflationary performance. In particular, perfect pass-through effect can be associated with accommodative exchange rate policy, which can moreover become the most important source of inflationary pressures. The analysis suggests that for CEEC-4 an early adoption of the Euro can provide the most efficient framework for reducing inflation.

Keywords: EMU accession; pass-through effect; I(2) cointegration analysis; policy accommodation (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 C32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-ifn and nep-tra
Date: 2004-04-01
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Persistent link: http://EconPapers.repec.org/RePEc:wdi:papers:2004-674

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