Monetary Policy Transmission Mechanisms and Inflation in Slovakia

Author/Editor:

Louis Kuijs

Publication Date:

May 1, 2002

Electronic Access:

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Summary:

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.

Series:

Working Paper No. 2002/080

Subject:

Currency markets Exchange rates Financial markets Financial services Foreign exchange Inflation Prices Real exchange rates Real interest rates

English

Publication Date:

May 1, 2002

ISBN/ISSN:

9781451850314/1018-5941

Stock No:

WPIEA0802002

Pages:

27

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