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Exchange Rate Pass-Through in Transition Economies: The Case of the Republic of Macedonia

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  • Besnik Fetai

Abstract

This paper investigates the relative costs and benefits associated with introducing a different exchange rate regime in the Republic of Macedonia. In this finding, all econometrics results, using different methodologies (SVAR and VECM), show that introducing a different strategy of the exchange rate targeting in order to promote rapid economic growth could easy disturb macroeconomic stability (after having achieved it at a substantial cost) without any significant economic benefits. In the long term, the coefficient of exchange rate reveals that a one percent change in the exchange rate will generate an increase in the prices level of 0.52 percent, indicating that 52 percent of changes in the exchange rate feed into the prices level. The investigation suggests that introducing a different strategy of the exchange rate regime is likely to incur more costs than benefits.

Suggested Citation

  • Besnik Fetai, 2011. "Exchange Rate Pass-Through in Transition Economies: The Case of the Republic of Macedonia," William Davidson Institute Working Papers Series wp1014, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:2011-1014
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    Cited by:

    1. repec:agr:journl:v:1(618):y:2019:i:1(618):p:51-60 is not listed on IDEAS
    2. Nasir SELIMI, & Valdrina SELIMI, 2017. "The Effects Of Exchange Rate On Economic Growth In The Republic Of Macedonia," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 6(3), pages 1-8, august.
    3. Yu HSING, 2019. "Is real depreciation or more government deficit expansionary? The case of Macedonia," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(618), S), pages 51-60, Spring.

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    More about this item

    Keywords

    exchange rate; pass-through effect; SVAR and VECM;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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