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

  • Fabrizio Coricelli

    ()

  • Boštjan Jazbec

    ()

  • Igor Masten

    ()

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.

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File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp674.pdf
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Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 2004-674.

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Length: 23 pages
Date of creation: 01 Apr 2004
Date of revision:
Handle: RePEc:wdi:papers:2004-674
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