Inflationary dynamics of a transition economy: the Croatian experience

Exchange rate pass-through and monetary policy in Croatia

“…Payne (2002) uses a VAR framework to show that Croatian inflation is Granger-caused by wage growth and exchange rate movements. Ross (2000) investigates inflation dynamics in Slovenia in a stationary VAR environment.…”

Investigating Croatian Inflation through the Cointegration with Structural Break Approach

“…Next we present the papers analysing Croatian inflation in more detail. Payne (2002) analyses the inflationary process in Croatia for the period January 1992 -December 1999 using a vector autoregression (VAR) approach. His results suggest that inflation is positively influenced by wage growth and currency depreciation.…”

“…They use two approaches. In the first one they estimate a structural VAR (SVAR), following Dibooglu and Kutan (2005), while in the second approach they replicate Payne's (2002) unrestricted VAR using the data from a later period. The results of their estimated SVAR indicate that terms of trade and balance of payment shocks are the most important factors generating inflation.…”

“…A commonly used model (see, for example, Ross, 2000;Payne, 2002;Botric and Cota, 2006;Malesevic Perovic, 2009) for analysing inflation is the one developed by Bruno (1993). In this model the main determinants of inflation (π) are wage growth (w), exchange rate changes (ε) and money growth (μ), or more formally:…”

Post stabilization estimates of money demand in Croatia: error correction model using the bounds testing approach

“…In October 1993, the anti-inflation stabilization program was introduced which was comprised of a restrictive monetary policy stance, liberalization of the foreign exchange market and the exchange rate, control over public sector wage growth, restructuring of public utilities pricing, and the passage of a balanced budget (Anusic et al, 1995;Payne, 2000Payne, , 2002Kraft, 2002). The stabilization program effectively changed the behavior of money demand with a reduction in expected inflation along with the appreciation of the nominal and real exchange rates.…”