TEFMJ Trends in Economics, Finance, and Management Journal TEFMJ 2671-3357 2671-3365 Balkan University Press 106 Research Article Exchange Rate Pass- Through to Inflation: Empirical Analysis for Southeast European Countries Memeti Era Memeti Karemani Selbije Abazi Chaushi Blerta South East European University, North Macedonia University of Tetovo 10 07 2026 8 1 37 46 CC BY-NC-ND 4.0

The aim of this research article is to analyze the Exchange Rate Pass-Through (ERPT) and consumer prices for the case of Southeast Europe, considering eight transition economies. Monetary systems alongside trade openness of these economies are essential factors for macroeconomic stability. Therefore, this study utilizes a balanced panel dataset covering two decades and adopting a Fixed Effects econometric framework through which the effects of exchange rate fluctuations, real economic growth, and trade integration on the Consumer Price Index (CPI) are estimated. Also, diagnostic assessments, such as Multicollinearity and Panel Unit Root analyses are performed to ensure the consistency and efficiency of the model. The results indicate a significant correlation between delayed exchange rate fluctuations and inflation, further intensified by the structural reliance of these countries on international trade. Trade openness serves as a primary driver of external price shocks, indicating that inflation in the Western Balkans is predominantly an imported occurrence. The paper concludes with policy recommendations for regional central banks, highlighting the necessity for proactive monetary initiatives to alleviate the lagged impacts of currency fluctuation on consumer purchasing power.

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