Monetary policy challenges during transition: the case of Serbia

During the period of transition to market economies, the economies of former socialist countries underwent major changes. As regards monetary policy, for example, central banks changed monetary policy goals, regimes and instruments. Although almost all of the countries concerned differed in terms of their starting point and monetary policy implementation, their central banks all focused on low and stable inflation in the transition agenda. Yet, bringing inflation down from high or moderate levels to low levels is a long and costly process, even in advanced economies. The Serbian case can be used as a good example of a small and open economy with deep roots of euroization and hyperinflation back in the 1990s. It took us years to find the right path; since 2012, however, policymakers have made a turnaround. Imbalances have been reduced, growth structures changed, structural reforms implemented and prices as well as exchange markets stabilized. Moreover, from 2012 onward, the country’s inflation targeting regime switched to a consistent approach to and full coordination of its policies, with full commitment to stability.