Abstract:

This paper investigates the exchange rate pass-through into producer and consumer price indexes for Moldavian economy during the period of 2000-2010. In order to determine the size and dynamics of the ERPT the recursive VAR model in first differences is performed, with six variables: oil price, output gap, nominal effective exchange rate, monetary aggregate M2, producer price index and consumer price index. The results of this study showed that the influence of the variations of the moldavian leu exchange rate on both price indexes, with small differences, is between moderate to low. This means that the National Bank of Moldova can use the exchange rate policy for desinflation,but the effects of this policy on the overall price level will be relatively small.