عبور از طریق نرخ ارز و سیاست های پولی در کرواسی
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|25268||2004||19 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Comparative Economics, Volume 32, Issue 3, September 2004, Pages 426–444
Exchange rate targeting is considered to be the best policy option in dollarized economies if wages and prices are indexed to the exchange rate. Croatia is a highly dollarized economy; however, our empirical investigation does not reveal a high exchange rate pass-through after stabilization. This finding is robust to different methodologies and suggests that dollarization is limited mostly to financial assets. Therefore, strict exchange rate targeting may not necessarily be the best policy option for Croatia. However, policy implications must be drawn with care due to the endogeneity of the pass-through to the policy regime. Journal of Comparative Economics32 (3) (2004) 426–444.
Monetary policy in Croatia has been successful in reducing inflation by using the exchange rate as the nominal anchor. This policy, defined as strict exchange rate targeting, is characterized by a very low tolerance of exchange rate movements and a marked activism of the central bank in foreign currency markets. Strict exchange rate targeting has been successful in ending hyperinflation and stabilizing the economy in the mid-1990s and also delivering low inflation thereafter. Recent changes in the legislative framework and moves towards a more extensive use of market-based instruments suggest that this policy may have to be revised in the future. By specifying price stability as the primary objective of monetary policy, the new Croatian National Bank (CNB) law reduces the emphasis on the exchange rate. The liberalization of the capital account, which is required for the accession process to the European Union (EU), is already testing the ability of the CNB to maintain tight control on the exchange rate. The development of financial markets provides new policy instruments, and the progressive reduction of the role of reserve requirements opens up new opportunities for a more active use of open market operations by the CNB. Hence, exchange rate fluctuations will be more pronounced in the future so that the CNB should be more tolerant of these fluctuations. This new policy requires information about the transmission mechanism of exchange rate movements passing through to domestic inflation. Exchange rate appreciations or depreciations have a direct impact on inflation by changing the price of tradables expressed in domestic currency. By altering the relative price of domestic and foreign goods, the exchange rate also affects inflation indirectly through changes in economic activity. Small, open economies that are price takers in the world market may expect exchange rate movements to feed into the domestic price level, although prices at various stages of the production chain are affected differently. Ceteris paribus, import prices should move identically with the exchange rate due to the law of one price. Once inputs are added, the corresponding price measure should reflect the weight of imports in the production process. However, estimated pass-through may deviate from this benchmark for several reasons. Strategic pricing by foreign companies may cause no pass-through.1 The existence of menu costs associated with price adjustment ensures that mere noise in the exchange rate, as long as it is regarded as stationary and small relative to a threshold, will not be reflected in price changes.2 Expectations and different forms of indexation may also affect the final result. Disregarding the wealth of channels through which the exchange rate can affect inflation, the available empirical evidence from advanced economies indicates low and decreasing pass-through (McCarthy, 2000). The pass-through appears to be endogenous to different regimes and tends to be smaller when inflation is low, which indirectly confirms the importance of expectations in the transmission mechanism (Choudri and Hakura, 2001). However, Ross, 2000 and Kuijs, 2002 do not find evidence of low pass-through in transition economies. This result may be due to the lack of credibility of the monetary authorities and to structural elements, e.g., the price-taking nature of domestic firms on international markets. Two features of the Croatian economy affect the magnitude of the pass-through. First, compared with other transition countries, Croatia is an intermediate case in terms of openness.3 Second, and more importantly, Croatia is a heavily dollarized economy with widespread asset substitution and some indexation of prices to the exchange rate. By itself, the second feature would indicate a large expected pass-through. From a policy perspective, Calvo and Reinhart (2002) consider a flexible exchange rate with limited de facto volatility as a symptom of the fear of floating. Due to the expected strong impact of the exchange rate on trade and inflation, central banks in small open economies are not indifferent to its movements. In emerging market economies, these concerns are compounded by large unhedged foreign currency exposures, which make the financial system vulnerable to exchange rate fluctuations. As a consequence, central banks in emerging markets are uncomfortable with exchange rate movements and intervene frequently to smooth them. Even though there is no explicit peg and central banks claim that their exchange rate is floating, intervention can be substantial enough to make the exchange rate relatively inflexible. Croatia is an example of the fear of floating. The CNB policy response to the wartime hyperinflation in the early 1990s was to peg implicitly the currency to the Deutsche mark. Even after stabilization was achieved in 1994, monetary policy was driven by exchange rate concerns.4 The tolerance of the CNB for exchange rate movements has been relatively low so that intervention has been frequent and systematic. Other transition economies have similar exchange rate arrangements, e.g., the Czech Republic, Hungary, the Slovak Republic, Slovenia, and Romania. Except for Hungary with a soft peg, the others have managed floats like Croatia. As Fig. 1 indicates, Romania, Slovenia, and Hungary have a history of continuous depreciation since 1994, which has been managed and less dramatic in Slovenia and Hungary. The Croatian currency, like the currencies of the Czech Republic and the Slovak Republic, has been fairly stable over time and even within this group its movements have been remarkably smooth, as Fig. 2 indicates. This visual impression is confirmed by the volatility measures presented in Table 1; Croatia exhibits the most inflexible exchange rate of all six countries.5 From January 1994 to July 2001, the probability of the monthly percent change in the kuna/DM exchange rate exceeding a 2.5 percent band has been only 1.1 percent.When the exchange rate is inflexible, shocks to money demand and expectations are accommodated by the central bank through purchases or sales of foreign exchange reserves. Thus, for a given distribution of shocks, the volatility of reserves and the monetary base are inversely related to the flexibility of the exchange rate. Table 1 shows that reserves and the monetary base in Croatia have indeed been the most volatile within the group of stable currencies. This evidence suggests that the relative inflexibility of the kuna/DM exchange rate may be the outcome of a deliberate policy by the CNB. The low tolerance of exchange rate fluctuations, and the consequent volatility of the monetary base, should be reflected in inflation. In fact, inflation volatility is high in Croatia relative to the Czech and Slovak Republics, even though a stable exchange rate and tight monetary policy have delivered relatively low rates of inflation. The motivation for this fear of floating and the consequences of dollarization are important issues.6 Foreign currency deposits represent more than 60 percent of broad money in Croatia, which is a much larger percentage than for other countries as Fig. 3 shows. The origins of this phenomenon go back to the early 1970s, when foreign currency deposits were introduced.7 During the 1990s, dollarization was driven initially by the war, which was accompanied by extensive economic instability and hyperinflation so that foreign currency was used as a means of payment. Even after macroeconomic stabilization in 1994, dollarization continued to increase until 1998, and it has not since significantly declined.8Under these circumstances, any independent monetary policy incurs serious risks of financial instability and its effectiveness in controlling inflation is limited severely. Sudden movements in the exchange rate may damage the balance sheets of firms and individuals, causing an increase in non-performing loans and endangering the stability of the banking system. Moreover, the impact of monetary tightening may be weakened if the consequent exchange rate appreciation improves the financial position of residents with a large proportion of foreign currency debt. In the extreme case of real dollarization, when prices and wages are set in foreign currency, monetary policy becomes completely ineffective and the only possible strategy is to target the exchange rate (Ize and Levi-Yeyati, 2001). Currently, dollarization in Croatia is motivated mainly by asset substitution because residents maintain a large proportion of their savings in foreign currency and banks provide loans that are either foreign currency-denominated or indexed to a foreign currency. Casual observation indicates that many prices, particularly property and consumer durable prices, are indexed to the exchange rate to some extent. Hence, we expect the pass-through coefficient to be large in Croatia. In the next section, we review the literature on exchange rate pass-through. Section 3 presents the empirical models and the estimation results. Section 4 concludes with a cautious support for a more flexible exchange rate.
نتیجه گیری انگلیسی
Monetary authorities tend to view the exchange rate as a major channel of monetary transmission. In small open economies such as Croatia, policy makers must assess the extent to which domestic inflation is affected by the exchange rate. If a large pass-through is associated with diffused indexation of wages and prices or real dollarization, this would present a serious constraint on the effectiveness of monetary policy and would require exclusive focus on the exchange rate. The conduct of monetary policy in Croatia, which can be characterized as strict exchange rate targeting, appears to be based, at least partly, on this assumption. We estimate the pass-through coefficient in Croatia using two different methods. The first is a stationary, recursive vector autoregressive (VAR) system in which exchange rate shocks feed into the manufacturing price index and the retail price index. Although the intermediate price index initially responds significantly to exchange rate movements and to movements in commodity prices, the retail price index does not. Even though the lack of an import price index may affect the precision of the estimates for Croatia, our evidence is consistent with that found by McCarthy (2000) for most advanced economies. The second method is a cointegrated VAR in which the information contained in the non-stationary data is exploited fully. Concentrating on the long run, the pass-through from the exchange rate to the intermediate price index is not observed but a pass-through coefficient of roughly 0.3 is obtained for the retail price index. This qualitative difference in results may be due to the fact that the recursive structure defines the pass-through rather narrowly as a causal consequence to disturbances in the exchange rate, while the pass-through relationship can be considered a pattern of the macroeconomic outcome, not necessarily yielding a causal interpretation, in the cointegration approach. The estimated coefficient does not indicate diffuse exchange rate indexation of prices and wages, which may argue for a more flexible exchange rate. Our results must be interpreted with caution. First, the presence of administered and controlled prices may have reduced the responsiveness of consumer prices in the past. However, as prices are liberalized progressively, the pass-through coefficient should increase. Second, the variability of the exchange rate over the sample period is extremely low. By itself, this makes it difficult to identify statistically significant relations with other variables. More importantly, the pass-through cannot be expected to remain the same under different conditions. When the exchange movements become more pronounced, the economy may react differently. If the transition to a new regime is not understood clearly by the public, larger exchange rate movements could destabilize expectations and money demand. More research is needed to evaluate fully the alternatives faced by the policy makers. The past successes of monetary policy in reducing inflation and the persistent vulnerability of the financial system to exchange rate movements argue for a conservative approach, even though the conditions for change are emerging in Croatia. Through a history of low inflation from 1994, the national bank is establishing credibility and the new central bank law fully recognizes its independence and its primary focus on low inflation. As supervisory oversight improves and prudential regulations are adjusted to ensure that currency risk is taken into account by banks, the financial system is becoming less vulnerable. The development of financial markets provides residents with instruments to hedge against currency risk. As a consequence, balance sheet effects are bound to become less important so that the impact of monetary policy will be strengthened.