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Monetary Policy Transmission Mechanisms and Inflation in Slovakia

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  • Louis Kuijs

Abstract

This paper presents the results of an empirical analysis into monetary policy transmission mechanisms and inflation in the Slovak Republic. The estimated vector autoregression (VAR) model suggests that inflation is determined by changes in foreign prices, the exchange rate, and wage costs, with a modest effect of aggregate demand, in line with theory for small, open economies. Monetary policy is shown to affect inflation via these channels. Changes in money supply seem to have a modest but rapid impact on prices. The measured effect of interest rate changes is modest and gradual, although it appears to have become more important in recent years.

Suggested Citation

  • Louis Kuijs, 2002. "Monetary Policy Transmission Mechanisms and Inflation in Slovakia," IMF Working Papers 2002/080, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2002/080
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    1. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 379-408.
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    Cited by:

    1. Andreas Hoffmann, 2010. "An Overinvestment Cycle In Central And Eastern Europe?," Metroeconomica, Wiley Blackwell, vol. 61(4), pages 711-734, November.
    2. Jérôme Héricourt & Iuliana Matei, 2007. "Transmission de la politique monétaire dans les pays d'E urope centrale et orientale : que savons-nous vraiment ?," Economie & Prévision, La Documentation Française, vol. 0(4), pages 221-238.
    3. Balázs Égert & Ronald MacDonald, 2009. "Monetary Transmission Mechanism In Central And Eastern Europe: Surveying The Surveyable," Journal of Economic Surveys, Wiley Blackwell, vol. 23(2), pages 277-327, April.
    4. Igor Velickovski & Geoffrey Thomas Pugh, 2011. "Constraints on exchange rate flexibility in transition economies: a meta-regression analysis of exchange rate pass-through," Applied Economics, Taylor & Francis Journals, vol. 43(27), pages 4111-4125.
    5. Mr. Kadima D. Kalonji & Jan Gottschalk & Mr. Ken Miyajima, 2008. "Analyzing Determinants of Inflation When There Are Data Limitation: The Case of Sierra Leone," IMF Working Papers 2008/271, International Monetary Fund.
    6. Jérôme Creel* & Sandrine Levasseur, 2007. "Monetary Policy Transmission Mechanisms in the CEECs: How Important are the Differences with the Euro Area?," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(1), pages 30-59, February.
    7. Armine Khachatryan & Mr. David A. Grigorian & Grigor Sargsyan, 2004. "Exchange Rate, Money, and Wages: What is Driving Prices in Armenia?," IMF Working Papers 2004/229, International Monetary Fund.
    8. Jérôme Creel & Sandrine Levasseur, 2006. "Canaux de transmission de la politique monétaire dans l'ue. Le cas de trois nouveaux entrants," Revue économique, Presses de Sciences-Po, vol. 57(4), pages 881-898.
    9. repec:spo:wpmain:info:hdl:2441/2976 is not listed on IDEAS
    10. Jérôme Creel & Sandrine Levasseur, 2006. "Canaux de transmission de la politique monétaire dans l'UE," Post-Print hal-03471868, HAL.
    11. Ran TAO & Zheng-Zheng LI & Xiao-Lin LI & Chi-Wei SU, 2018. "A Reexamination of Friedman-Ball’s Hypothesis in Slovakia - Evidence from Wavelet Analysis," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 41-54, December.
    12. Beirne, John & Bijsterbosch, Martin, 2011. "Exchange rate pass-through in central and eastern European EU Member States," Journal of Policy Modeling, Elsevier, vol. 33(2), pages 241-254, March.
    13. Martins Bitans, 2004. "Pass-Through of Exchange Rates to Domestic Prices in East European Countries and the Role of Economic Enviroment," Working Papers 2004/04, Latvijas Banka.
    14. Fakhri, Hasanov & Khudayar, Hasanli, 2011. "Why had the Money Market Approach been irrelevant in explaining inflation in Azerbaijan during the rapid economic growth period?," MPRA Paper 29559, University Library of Munich, Germany.
    15. repec:hal:spmain:info:hdl:2441/2976 is not listed on IDEAS
    16. Billmeier, Andreas & Bonato, Leo, 2004. "Exchange rate pass-through and monetary policy in Croatia," Journal of Comparative Economics, Elsevier, vol. 32(3), pages 426-444, September.

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