Exchange Rate Policy and Inflation in Acceding Countries: The Role of Pass-Through

23 Pages Posted: 16 Apr 2004

See all articles by Fabrizio Coricelli

Fabrizio Coricelli

University of Siena - Department of Political and International Sciences ; Paris School of Economics (PSE); Centre for Economic Policy Research (CEPR)

Bostjan Jazbec

University of Ljubljana - Faculty of Economics

Igor Masten

University of Ljubljana - Faculty of Economics

Date Written: April 2004

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 accomodation

JEL Classification: E42, E52, E58, C32

Suggested Citation

Coricelli, Fabrizio and Jazbec, Bostjan and Masten, Igor, Exchange Rate Policy and Inflation in Acceding Countries: The Role of Pass-Through (April 2004). Available at SSRN: https://ssrn.com/abstract=530762 or http://dx.doi.org/10.2139/ssrn.530762

Fabrizio Coricelli (Contact Author)

University of Siena - Department of Political and International Sciences ( email )

Via Mattioli, 10
Siena, 53100
Italy

Paris School of Economics (PSE)

48 Boulevard Jourdan
Paris, 75014 75014
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Bostjan Jazbec

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia
+386 1 5892 623 (Phone)
+ 386 1 5892 698 (Fax)

Igor Masten

University of Ljubljana - Faculty of Economics ( email )

Kardeljeva ploscad 17
Ljubljana, 1000
Slovenia

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