Interest Rate Transmission in a Dollarized Economy: the Case of Serbia
AbstractThis paper investigates the efficiency of monetary policy in Serbia, ? highly dollarized economy. Results suggest that the interest rate channel is shaded, and that it is dependent on the degree of dollarization. Interest rate movements are primarily determined by the movement of interest rates in the Euro zone. The impact the 2W repo rate of NBS on the lending interest rates becomes significant only after we control for the level of dollarization. The pass-through of 2W repo rate to interest rates is observed only when the dollarization falls below 64.5%. Maximum potential pass-through of 2W repo rate to interest rates (achieved at zero dollarization) is between 0.169 and 0.820, depending on the model specification.
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Bibliographic InfoPaper provided by National Bank of Serbia in its series Working papers with number 16.
Length: 42 pages
Date of creation: Sep 2008
Date of revision:
Contact details of provider:
Postal: National Bank of Serbia, 12 Kralja Petra St, 11 000 Belgrade, Republic of Serbia
Web page: http://www.nbs.rs
More information through EDIRC
rates; transmission mechanism; dollarization;
Find related papers by JEL classification:
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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