Monetary transmission mechanism in Estonia - some theorethical considerations and stylized aspects

Raoul Lättemäe

No 2001-4, Bank of Estonia Working Papers from Bank of Estonia

Abstract: The monetary system in Estonia is based on the currency board arrangement. The strong commitments and rule-based features of currency board imply that there is no active monetary policy in Estonia - all necessarily monetary adjustments 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. Some theoretical and intuitive aspects that can affect this process in Estonia have gained special attention in this paper.

Pages: 24 pages
Date: 2001-10-13, Revised 2001-10-13
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-ifn, nep-mac, nep-mon and nep-tra
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Working Paper: Monetary Transmission Mechanism in Estonia - Some Theoretical Considerations and Stylized Aspects (2002)
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