engleski

Monetary Policy Credibility in the Republic of Croatia

For the past 10 years Croatian economy has gone through a period of stable prices and more-less continuous output growth since the stabilization programme was carried out in 1994. However, monetary policy credibility in the Republic of Croatia has always been a matter of discussion. One of the main indicators of the lack of credibility in Croatia’ s monetary policy is high level of foreign currency deposits in the M4 monetary aggregate caused by high dollarization level. This work examines current situation in the Republic of Croatia using the theory of time consistency which provides a framework for the analysis of the role and responsibilities of central bank in the implementation of monetary policy. For that purpose we intend to compare level of monetary policy credibility in Croatia with the one in Slovenia as the country characterized by similar economic historical heritage. Since similar methods of achieving monetary policy credibility are being used by Croatian national bank and the ECB a comparison will be made concerning the EMU. Further more we intend to examine possibilities of increasing the level of monetary policy credibility in Croatia if current monetary policy persists.

monetary policy; credibility; theory of time consistency

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