Transmission mechanisms of monetary policy in Central and Eastern Europe. Dynamic VAR analysis

Period: January 2001 - June 2002
Coordinators: Georgy Ganev

In order to achieve the goal of smooth transition to the European monetary area, Central and East European central banks have to acquire a very deep understanding of the transmission mechanism between monetary policy instruments and inflation. The goal of the project was to help acquire such knowledge for the ten EU candidate countreis from Central and Eastern Europe Recognizing that the analysis in the transition context cannot rely fully on the traditional static models, the research team utilized dynamic VAR tools to reach inferences about the relationship between monetary policy variables and different measures of inflation.

As of the end of 2001 the CLS participant has submitted two chapters, a review of monetary policy developments and a literature review of all published work on monetary transmission for the ten countries of interest

This research yielded a unique set of information about the structure of transmission processes comparable across countries. Several aspects of the analysis were taken up for the first time in the comparative context of Central and Eastern Europe.