Monetary Policy Transmission Mechanisms and Inflation in Slovakia

Louis Kuijs

No 2002/080, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; price; core CPI; price level; Monetary policy; inflation; transmission mechanisms; transition; monetary policy transmission mechanisms; channel work; exchange rate peg; oil price; wage cost; output gap; Real interest rates; Exchange rates; Real exchange rates; Currency markets (search for similar items in EconPapers)
Pages: 27
Date: 2002-05-01
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Citations: View citations in EconPapers (18)

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