Monetary Policy Transmission in the Balkans in the 21st Century: Empirical Evidence

Abstract

This study investigates monetary policy transmission in the Balkans in the 21 st century. In order to analyse the reaction of output and prices to a shock in monetary policy (defined as an increase in the interest rate), this study employs structural vector auto regression approach. The obtained impulse responses suggest that monetary policy in the six Balkan countries under investigation is not effective in influencing output and prices, which points towards a very limited use of monetary policy in the overall conduct of economic policy.