Monetary Transmission Mechanism in Estonia - Some Theoretical Considerations and Stylized Aspects

Raoul Lättemäe ()

Macroeconomics from EconWPA

Abstract: The monetary system in Estonia is based on the currency board arrangement with German Mark. The strong commitments and rule-based features of currency board imply that there is no active monetary policy in Estonia – all necessarily monetary djustments are left to the market forces. Under fixed exchange rate and free capital mobility Estonian monetary conditions are therefore closely linked with monetary policy in Europe – in addition to the changes in Estonian risk-premium, interest rate developments in Europe can directly influence Estonian interest rates. Those monetary signals transmit widely into Estonian financial sector and ultimately into Estonian real sector through various channels. The interest rate and credit channel have gained special attention in this paper.

Keywords: CBA; MTM; Monetary Policy Transmission; Estonia; Currency Board (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn, nep-mon and nep-tra
Date: 2002-12-09
Note: Type of Document - Acrobat PDF; pages: 25; figures: 11 figures. Working Papers of Eesti Pank. No 4, 2001. See also:
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http://129.3.20.41/eps/mac/papers/0212/0212001.pdf (application/pdf)

Related works:
Working Paper: Monetary transmission mechanism in Estonia - some theorethical considerations and stylized aspects (2001)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0212001

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