Exchange rate pass-through and monetary policy in Croatia

Billmeier, Andreas; Bonato, Leo

doi:10.1016/j.jce.2004.03.004

Cited by 36 publications

(21 citation statements)

References 30 publications

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“…Expectedly, currency depreciation is found to add to inflation, and this pass-through coefficient is found to be quite large, contrary to the findings of Billmeier and Bonato (2004) and Kraft (2003). Unit labour costs are also identified as an important cost-push factor.…”

Section: Resultscontrasting

confidence: 57%

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Investigating Croatian Inflation through the Cointegration with Structural Break Approach

Perović¹

2015

JECOSS

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Section: Resultscontrasting

confidence: 57%

“…Therefore, a large(r) pass-through effect can be expected for countries with an accommodative monetary policy. Interestingly, Billmeier and Bonato (2004) find that exchange rate pass-through has been low in Croatia in the period 1994. Kraft (2003 also finds the level of pass-through in Croatia to be modest.…”

Section: Yearmentioning

confidence: 94%

Investigating Croatian Inflation through the Cointegration with Structural Break Approach

Perović¹

2015

JECOSS

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“…With such low rates, the Croatian National Bank has begun succeeding in its 'primary objective to achieve and maintain price stability' (2001 National Bank Act). This low inflation has been achieved while the Bank has been described as being engaged in 'strict exchange rate targeting' (Billmeier and Bonato, 2004). Or as Kraft (2003) puts it, 'The main intermediate target is the exchange rate, not any monetary aggregate.…”

Section: Croatian Money Policy and Banking Backgroundmentioning

confidence: 99%

Money Demand in an EU Accession Country: A VECM Study of Croatia

Cziráky

Gillman

2006

Bulletin of Econ Res

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The paper estimates the money demand in Croatia using monthly data from 1994 to 2002. A failure of the Fisher equation is found, and adjustment to the standard money-demand function is made to include the inflation rate as well as the nominal interest rate. In a two-equation cointegrated system, a stable money demand shows rapid convergence back to equilibrium after shocks. This function performs better than an alternative using the exchange rate instead of the inflation rate as in the 'pass-through' literature on exchange rates. The results provide a basis for inflation rate forecasting and suggest the ability to use inflation targeting goals in transition countries during the EU accession process. Finding a stable money demand also limits the scope for central bank 'inflation bias'.

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“…Nevertheless, empirical studies have failed to find evidence of an ERPT effect. Although many authors speculate on potential thresholds or regime-changing modes in the economy, there is no empirical evidence of this effect for the period after stabilization (Billmeier and Bonato 2004;Gattin-Turkalj and Pufnik 2002).…”

mentioning

confidence: 99%

Threshold Model of the Exchange Rate Pass-Through Effect

Tica

Posedel

2009

Eastern European Economics

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This paper investigates the exchange rate pass-through (ERPT) effect in Croatia using a threshold model. To date, empirical studies have failed to find a high degree of ERPT in Croatia, even though exchange rate stability has been one of the goals of monetary policy throughout the transition period. Using a nonlinear model, this study demonstrates that ERPT is present in the data and shows why it cannot be detected with a linear model. According to our estimates, there is a threshold at 5.91 percent of the monthly growth rate of the nominal exchange rate of the German mark (euro), with the 95 percent interval between about 2.7 and 21.8 percent. Consistent with the theories of sticky prices or pricing to market, ERPT is asymmetric around the threshold: below it, the ERPT effect is weak or statistically insignificant, and above it, the effect is strong and significant.The strength of the effect of exchange rate changes on domestic price levels-the exchange rate pass-through (ERPT) effect-has several important implications in considering the role of the exchange rate in macroeconomic policy design. If the ERPT effect is high, the nominal exchange rate does not have much effect on the real exchange rate. In that case, any discussions of exchange rate depreciation and its potential effects on the trade deficit are no longer relevant.

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Exchange rate pass-through and monetary policy in Croatia

Cited by 36 publications

References 30 publications

Investigating Croatian Inflation through the Cointegration with Structural Break Approach

Investigating Croatian Inflation through the Cointegration with Structural Break Approach

Money Demand in an EU Accession Country: A VECM Study of Croatia

Threshold Model of the Exchange Rate Pass-Through Effect

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