ANALYSIS OF THE MONETARY POLICY TRANSMISSION INTO CEEs COUNTRIES. A VAR APPROACH

Understanding how real economy adjust to the exchange rate fluctuations enables us to anticipate the effects on inflation, capital market, exports, as well as the monetary policy responses. This study examines the extent of the exchange rate pass-through to the real economy (consumer price index, industrial production, capital market, exports, interest rate) in Bulgaria, Czech Republic, Poland, Romania, and Hungary over the 2008M01-2019M08 period. A Vector Autoregressive analysis using impulse-response functions supported the results for the short term and found a lower degree of passthrough for the exchange rate shocks for all CEE countries. The results of its econometric analysis show that the degree of the exchange rate pass-through is incomplete. The conclusion is that exchange rate remains an important instrument for monetary policy in these economies.