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Transition Studies Review

, Volume 20, Issue 3, pp 309–324 | Cite as

Exchange Rate Pass-Through in Transition Economies: The Case of Republic of Macedonia

  • Besnik FetaiEmail author
Transition Finance and Banking Research
  • 100 Downloads

Abstract

This paper investigates the relative costs and benefits associated with introducing a different exchange rate regime in the Republic of Macedonia. In this finding, all econometrics results, using different methodologies (SVAR and VECM), show that introducing a different strategy of the exchange rate targeting in order to promote rapid economic growth could easy disturb macroeconomic stability (after having achieved it at a substantial cost) without any significant economic benefits. In the long term, the coefficient of exchange rate reveals that a 1 % change in the exchange rate will generate an increase in the prices level of 0.52 %, indicating that 52 % of changes in the exchange rate feed into the prices level. The investigation suggests that introducing a different strategy of the exchange rate regime is likely to incur more costs than benefits.

Keywords

Exchange rate Pass-through effect SVAR and VECM 

JEL Classification

E44 E55 E62 E77 

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Copyright information

© CEEUN 2013

Authors and Affiliations

  1. 1.Faculty of Business and EconomicsSoutheast European UniversityTetovoMacedonia

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