Pass-Through of Exchange Rates to Prices in Serbia: 2001-2007
This paper estimates the pass-through effect of the exchange rate to prices in Serbia. Results obtained using ADL and VAR methodology suggest that the effect of exchange rate to inflation is Serbia is relatively high, but, as it is the case in most countries and previous studies on Serbia, incomplete and well below one. The estimate of the passthrough effect obtained using ADL methodology is between 0.13 and 0.31 in the short-run, and between 0.19 and 0.50 in the long-run. During the depreciation of the domestic currency (against the nominal effective exchange rate constructed from euro and U.S. dollar) the effect is considerably higher, and it reaches even 0.90 when we look at the retail price index.
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