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Monetary Discretion By Fiscal Means: The Case Of Bulgaria

Author

Listed:
  • Preslav Dimitrov

    (South-West University “Neofit Rilski”, Faculty of Economics, Blagoevgrad)

  • Ivan Todorov

    (South-West University “Neofit Rilski”, Faculty of Economics, Blagoevgrad)

  • Stoyan Tanchev

    (South-West University “Neofit Rilski”, Faculty of Economics, Blagoevgrad, Bulgaria)

  • Petar Yurukov

    (South-West University “Neofit Rilski”, Faculty of Economics, Blagoevgrad)

Abstract

The specific design of the Bulgarian currency board arrangement (CBA), which provides an opportunity for the Bulgarian government to conduct discretionary monetary policy by changes in the fiscal reserve, was analyzed. The impact of government deposit fluctuations on the dynamics of reserve money and interbank interest rates was investigated. The hypotheses of an automatic adjustment mechanism and a liquidity effect under the Bulgarian currency board arrangement were tested. The methodology employed was a vector autoregression, which included the following variables: MB – monetary base; BP – the balance of payments; GD – government deposit on the balance sheet of the Issue Department of the Bulgarian National Bank; MRR – minimum required reserve ratio of commercial banks. The target variable was MB. Monthly data for the period of January 1998 - December 2018 were used. The study results did not provide evidence of a statistically significant impact of changes in government deposit on reserve money and interbank interest rates. The hypotheses for the existence of an automatic adjustment mechanism and a liquidity effect did not find an empirical confirmation.

Suggested Citation

  • Preslav Dimitrov & Ivan Todorov & Stoyan Tanchev & Petar Yurukov, 2019. "Monetary Discretion By Fiscal Means: The Case Of Bulgaria," CBU International Conference Proceedings, ISE Research Institute, vol. 7(0), pages 56-67, September.
    • Handle: RePEc:aad:iseicj:v:7:y:2019:i:0:p:56-67
    DOI: 10.12955/cbup.v7.1341
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    More about this item

    Keywords

    Bulgaria; currency board arrangement; automatic adjustment mechanism; liquidity effect;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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