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Does a discretionary policy or an automatic adjustment mechanism determine monetary conditions in Bulgaria?

Author

Listed:
  • Ivan Todorov
  • Mariana Usheva
  • Stoyan Tanchev
  • Petar Yurukov

Abstract

The goal of this research is to find out what determines monetary conditions in Bulgaria under a currency board arrangement – the automatic adjustment mechanism of the orthodox currency boards or discretionary policies of the government and the central bank. A time series vector autoregression for the period 1998-2018 is employed in order to investigate the impact of the fiscal reserve and the minimum required reserves of the commercial banks on the monetary base, the interbank interest rate, the money supply and the inflation rate. The empirical results indicate that the automatic adjustment mechanism does not function under the Bulgarian currency board but the policies of the government and the central bank have a discretionary effect on monetary conditions in the country.

Suggested Citation

  • Ivan Todorov & Mariana Usheva & Stoyan Tanchev & Petar Yurukov, 2020. "Does a discretionary policy or an automatic adjustment mechanism determine monetary conditions in Bulgaria?," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 95-114.
    • Handle: RePEc:bas:econth:y:2020:i:4:p:95-114
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    References listed on IDEAS

    as
    1. Petar Chobanov & Nikolay Nenovsky, 2004. "Money Market Liquidity under Currency Board ??? Empirical Investigations for Bulgaria," William Davidson Institute Working Papers Series 2004-693, William Davidson Institute at the University of Michigan.
    2. Jean-Baptiste Desquilbet & Nikolay Nenovsky, 2004. "Credibility and Adjustment : Gold Standards versus Currency Boards," CAE Working Papers 11, Aix-Marseille Université, CERGAM.
    3. Nenovsky Nikolay & Hristov Kalin & Mihaylov Mihail, 2001. "Comparing Currency Board Automatic Mechanism in Bulgaria, Estonia and Lithuania," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 11(4), pages 1-44, December.
    4. J.B. Desquilbert & Nikolay Nenovsky, 2004. "Credibility and adjustment: gold standards and currency boards compared," Post-Print halshs-00259743, HAL.
    5. Nenovsky, Nikolay & Hristov, Kalin, 2002. "The new currency boards and discretion: empirical evidence from Bulgaria," Economic Systems, Elsevier, vol. 26(1), pages 55-72, April.
    6. Gancho Todorov Ganchev, 2010. "The twin deficit hypothesis: the case of Bulgaria," Financial Theory and Practice, Institute of Public Finance, vol. 34(4), pages 357-377.
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    More about this item

    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

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