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An assessment of the dynamic effects of monetary policy in Macedonia

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  • Dimitar Eftimoski

Abstract

Macedonia, as a small emerging economy, is exposed to foreign risks such as: exchange rate volatility, trade distortions, and highly volatile capital flows. To ‘protect’ its economy, since 1995, the Macedonian Central Bank has applied the monetary strategy of exchange rate targeting, where the interest rate on Central Bank bills auctions is a basic monetary-policy instrument. This paper re-examined the effectiveness of the current monetary policy in Macedonia using the policy-oriented vector error correction model (VECM). We found that the Macedonian Central Bank demonstrates a low level of monetary-policy effectiveness and the existing monetary-policy strategy does not necessarily promote its ability to react countercyclically.

Suggested Citation

  • Dimitar Eftimoski, 2019. "An assessment of the dynamic effects of monetary policy in Macedonia," Applied Economics Letters, Taylor & Francis Journals, vol. 26(10), pages 823-829, June.
    • Handle: RePEc:taf:apeclt:v:26:y:2019:i:10:p:823-829
    DOI: 10.1080/13504851.2018.1501151
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    Cited by:

    1. Dimitar EFTIMOSKI, 2019. "Improving Short-Term Forecasting of Macedonian GDP: Comparing the Factor Model with the Macroeconomic Structural Equation Model," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 32-53, June.

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