IS EXCHANGE RATE PASS THROUGH EFFECT VALID IN SERBIA? EMPIRICAL TESTING BY USING CO-INTEGRATION TECHNIQUES

Nemanja Lojanica; Nenad Janković; TIjana Tubić Ćurčić

doi:10.5937/ejae23-60665

Nemanja Lojanica Faculty of Economics University of Kragujevac
Nenad Janković University of Kragujevac, Faculty of Economics
TIjana Tubić Ćurčić University of Kragujevac, Faculty of Economics

DOI: https://doi.org/10.5937/ejae23-60665

Keywords: exchange rate, inflation, ARDL, case study

Abstract

The aim of this paper is to examine whether the exchange rate pass-through effect on prices in Serbia is present. In a small and open economy with a managed floating exchange rate regime, the impact of exchange rate changes on inflation is particularly important. Since this topic has been extensively studied, the contribution of this paper lies in applying several cointegration techniques and analyzing a specific time period for the case of Serbia. The selected time frame is 2007–2021, with monthly data. The research results show that the exchange rate pass-through effect on prices is incomplete. Additionally, it has been found that the effect is more pronounced in the long run and that the strength of the impact depends on the cointegration technique used.