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

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: C32 E42 E52 E58 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2004-04-01
New Economics Papers: this item is included in nep-eec, nep-ifn and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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