Exchange Rate Pass-Through and Monetary Policy in Croatia

Leo Bonato and Andreas Billmeier ()

No 2002/109, IMF Working Papers from International Monetary Fund

Abstract: Exchange rate targeting is considered the best policy option in dollarized economies when wages and prices are indexed to the exchange rate. Croatia is a highly dollarized economy, but empirical investigation conducted in this paper shows that exchange rate pass-through has been low after stabilization. This finding, which is robust to different methodologies (VAR, cointegration), would suggest that dollarization is mostly limited to financial assets and therefore that strict exchange rate targeting may not necessarily be the best option. However, policy implications are unclear due to the endogeneity of the pass-through to the policy regime.

Keywords: WP; retail price index; Croatia; pass-through; VAR; inflation; distribution chain; cointegration; price level; exchange rate movement; time series; exchange rate appreciation; HWWA commodity price index; exchange rate shock; DM exchange rate; Exchange rates; Price indexes; Exchange rate adjustments; Vector autoregression (search for similar items in EconPapers)
Pages: 34
Date: 2002-06-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Journal Article: Exchange rate pass-through and monetary policy in Croatia (2004)
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