Is the exchange rate pass-through effect valid in Serbia? Empirical evidence using cointegration techniques

The aim of this paper is to examine the presence and extent of the exchange rate pass-through effect on consumer prices in Serbia. In a small and open economy operating under a managed floating exchange rate regime, understanding the impact of exchange rate changes on inflation is crucial for effective monetary policy. Since this topic has been extensively studied, the contribution of this paper lies in applying several cointegration techniques to monthly data spanning a specific time period from 2007 to 2021, with a focus on the Serbian context. 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 significant over the long run and that the strength of the impact depends on the cointegration technique used.