engleski

Determinants of Croatian Money Supply

In this paper author applies money multiplier method to assess the determinants of Croatian money supply. The research shows that with the introduction of recession in Croatia, two components of Friedman – Schwartz equations which are influenced by the behaviour of commercial banks and non-bank public has changed significantly. Because of that, money multiplier falls below 1. Furthermore, the study shows that because of selected exchange rate regime, the high euroisation of the Croatian economy and because of reduced inflow of foreign exchange, monetary authority has difficulties in controlling the monetary base. In order to achieve its main objectives - price stability and stable exchange rate, the Croatian National Bank (CNB) combines intervention in the foreign exchange market with the sterilization measures such as the minimum required foreign currency claims and open market operations and changes in the reserve requirement rate. Recently, because of economic crises in Croatia, monetary policy has substantially changed from the relatively restrictive to an expansionary. However, due to problems in the transmission channels, this change did not boost the production and employment.

Money multiplier, monetary aggregates, money supply, exchange rate regime, economic crises

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