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Abstract
The paper focus on the time adjustment paths of the exchange rate and agricultural producer
and industrial prices in response to unanticipated monetary shocks following model
developed by Saghaian et al. (2002). Results indicate that agricultural prices adjust faster than
industrial prices to innovations in the money supply, affecting relative prices in the short run,
but strict long-run money neutrality does not hold. The impulse response analysis shows that
an exogenous shock to the money supply has a significant and volatile effect on the three
price variables. The extent of overshooting in agricultural prices is twice as large as for
exchange rates or industrial prices. This indicates that in the case of monetary shocks the
sectors associated with flexible changes bear the burden of adjustment vis-a-vis the sectors
with sticky changes.The exchange rate pass-through on agricultural producer prices revealed
by the forecast error variance analysis indicates the relatively greater importance of the
exchange rate than the money supply in explaining the expected variation of the agricultural
producer price. This is consistent with floating exchange rate policy, while agricultural trade
policy for sensitive products has been more restricted until Slovenia joined the European
Union.