<abstract xmlns="http://www.w3.org/1999/xhtml"><p>Serbia has applied inflation targeting against the backdrop of financial dollarization for almost a decade. In such circumstances, efficiency of monetary policy instruments decreases and begs the question of efficiency of the monetary regime efficiency issue. Although there is some empirical testing of financial dollarization effects on monetary policy performance in the inflation targeting regime for some countries, such studies for Serbia mostly cover periods of early application of the regime.</p><p>Therefore, the authors analysed financial dollarization effects on prices, i.e. exchange rate pass-through effect using Serbia as an example. The study concludes that although unpredictable changes in financial dollarization strongly affect nominal exchange rate, prices level is subject to moderate but persistent increase upon this shock.</p></abstract>

Serbia has applied inflation targeting against the backdrop of financial dollarization for almost a decade. In such circumstances, efficiency of monetary policy instruments decreases and begs the question of efficiency of the monetary regime efficiency issue. Although there is some empirical testing of financial dollarization effects on monetary policy performance in the inflation targeting regime for some countries, such studies for Serbia mostly cover periods of early application of the regime.Therefore, the authors analysed financial dollarization effects on prices, i.e. exchange rate pass-through effect using Serbia as an example. The study concludes that although unpredictable changes in financial dollarization strongly affect nominal exchange rate, prices level is subject to moderate but persistent increase upon this shock.

The Impact of Financial Dollarization on Inflation Targeting: Empirical Evidence from Serbia

Belgrade University and Central Bank of Montenegro

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Serbia has applied inflation targeting against the backdrop of financial dollarization for almost a decade. In such circumstances, efficiency of monetary...

The Impact of Financial Dollarization on Inflation Targeting: Empirical Evidence from Serbia

Published Online: May 22, 2017

Page range: 23 - 43

Received: Nov 11, 2016

Accepted: Feb 27, 2017

DOI: https://doi.org/10.1515/jcbtp-2017-0011

Keywords
Serbia, financial dollarization, inflation targeting, pass-through effect

© 2017 Central Bank of Montenegro

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

The Impact of Financial Dollarization on Inflation Targeting: Empirical Evidence from Serbia

Published Online: May 22, 2017

Page range: 23 - 43

Received: Nov 11, 2016

Accepted: Feb 27, 2017

DOI: https://doi.org/10.1515/jcbtp-2017-0011

KeywordsSerbia, financial dollarization, inflation targeting, pass-through effect

© 2017 Central Bank of Montenegro

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Keywords
Serbia, financial dollarization, inflation targeting, pass-through effect