IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/46537.html
   My bibliography  Save this paper

Euroization and cyclical stabilization in Montenegro: an empirical analysis

Author

Listed:
  • Sokic, Alexandre
  • FABRIS, Nikola

Abstract

The aim of this paper is to evaluate the importance of the issue of the loss of an independent monetary policy in the case of officially euroized Montenegro. We examine the extent to which the monetary policy of the European Central Bank, which is set according to the economic conditions prevailing in the euro area, has contributed to the stabilisation of the business cycle of unilaterally euroized Montenegro. It is shown that under euroization the ECB monetary policy has been acyclical with respect to Montenegrin inflation and significantly countercyclical with respect to Montenegrin output growth. The comparative analysis with Serbia does not show that keeping an independent monetary policy would have improved the cyclical stabilisation in Montenegro. The pass-through from ECB policy rates to retail interest rates prevailing at commercial banks in Montenegro is shown to depend significantly on the macroeconomic and banking conditions prevailing in Montenegro.

Suggested Citation

  • Sokic, Alexandre & FABRIS, Nikola, 2013. "Euroization and cyclical stabilization in Montenegro: an empirical analysis," MPRA Paper 46537, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:46537
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/46537/1/MPRA_paper_46537.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Kurt Schuler, 2005. "Some Theory and History of Dollarization," Cato Journal, Cato Journal, Cato Institute, vol. 25(1), pages 115-125, Winter.
    2. Louis-Philippe Rochon & Sergio Rossi & Sergio Rossi, 2003. "Dollarization Out, Euroization In," International Journal of Political Economy, Taylor & Francis Journals, vol. 33(1), pages 21-41.
    3. Nikola Fabris & Zorica Kalezic, 2008. "Is monetary policy possible without an issuance function: the case of Montenegro," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 1(4), pages 356-375.
    4. Edwards, Sebastian & Magendzo, I. Igal, 2006. "Strict Dollarization and Economic Performance: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(1), pages 269-282, February.
    5. Carl E. Walsh, 2010. "Monetary Theory and Policy, Third Edition," MIT Press Books, The MIT Press, edition 3, volume 1, number 0262013770, April.
    6. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 15(30), pages 08-45.
    7. Edwards, Sebastian, 2001. "Dollarization: Myths and realities," Journal of Policy Modeling, Elsevier, vol. 23(3), pages 249-265, April.
    8. Alexandre Sokic, 2012. "The Monetary Analysis of Hyperinflation and the Appropriate Specification of the Demand for Money," German Economic Review, Verein für Socialpolitik, vol. 13(2), pages 142-160, May.
    9. Adalbert Winkler & Francesco Mazzaferro & Carolin Nerlich & Christian Thimann, 2004. "Official dollarisation/euroisation - motives, features and policy implications of current cases," Occasional Paper Series 11, European Central Bank.
    10. Ilan Goldfajn & Gino Olivares, 2000. "Is adopting Full Dollarization the solution? Looking at the evidence," Textos para discussão 416, Department of Economics PUC-Rio (Brazil).
    11. Henri Bourguinat & Larbi Dohni, 2002. "La dollarisation comme solution en dernier ressort," Revue Française d'Économie, Programme National Persée, vol. 17(1), pages 57-96.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Arslan Razmi, 2022. "Unilateral currency union with a high-income area: the case of Montenegro," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 19(1), pages 31-61, June.
    2. Arslan Razmi, 2022. "Unilateral currency union with a high-income area: the case of Montenegro," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 19(1), pages 31-61, June.
    3. Arslan Razmi, 2018. "Montenegro’s Unilateral Euroization," UMASS Amherst Economics Working Papers 2018-13, University of Massachusetts Amherst, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sokic, Alexandre, 2015. "Cost efficiency of the banking industry and unilateral euroisation: A stochastic frontier approach in Serbia and Montenegro," Economic Systems, Elsevier, vol. 39(3), pages 541-551.
    2. Sebastian Edwards, 2011. "Exchange-Rate Policies in Emerging Countries: Eleven Empirical Regularities From Latin America and East Asia," Open Economies Review, Springer, vol. 22(4), pages 533-563, September.
    3. Sebastian Edwards & I. Igal Magendzo, 2003. "Dollarization and economic performance: What do we really know?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(4), pages 351-363.
    4. Betts, Caroline & Devereux, Michael B, 2000. "International Monetary Policy Coordination and Competitive Depreciation: A Reevaluation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 722-745, November.
    5. Sebastian Edwards & I. Igal Magendzo, 2001. "Dollarization, Inflation and Growth," NBER Working Papers 8671, National Bureau of Economic Research, Inc.
    6. Sebastian Edwards, 2011. "Exchange Rates in Emerging Countries: Eleven Empirical Regularities from Latin America and East Asia," NBER Working Papers 17074, National Bureau of Economic Research, Inc.
    7. Jeffrey A. Frankel & Shang-Jin Wei, 2004. "Managing Macroeconomic Crises," NBER Working Papers 10907, National Bureau of Economic Research, Inc.
    8. International Monetary Fund, 2002. "Macroeconomic Adjustment in a Highly Dollarized Economy: The Case of Cambodia," IMF Working Papers 2002/092, International Monetary Fund.
    9. Jayjit Roy, 2014. "On the robustness of the trade-inducing effects of trade agreements and currency unions," Empirical Economics, Springer, vol. 47(1), pages 253-304, August.
    10. repec:onb:oenbwp:y::i:65:b:1 is not listed on IDEAS
    11. Roberto Duncan, 2003. "Floating, Official Dollarization, and Macroeconomic Volatility:An Analysis for the Chilean Economy," Working Papers Central Bank of Chile 249, Central Bank of Chile.
    12. Alain Raybaut & Dominique Torre, 2004. "Unions monétaires, caisses d'émission et dollarisation : les fondements analytiques des systèmes de change « ultra-fixes »," Revue d'Économie Financière, Programme National Persée, vol. 75(2), pages 37-54.
    13. Arslan Razmi, 2022. "Unilateral currency union with a high-income area: the case of Montenegro," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 19(1), pages 31-61, June.
    14. Sebastian Edwards & Igal Magendzo, 2003. "A Currency of One's Own? An Empirical Investigation on Dollarization and Independent Currency Unions," NBER Working Papers 9514, National Bureau of Economic Research, Inc.
    15. Sebastian Edwards, 2006. "Monetary unions, external shocks and economic performance: A Latin American perspective," International Economics and Economic Policy, Springer, vol. 3(3), pages 225-247, December.
    16. Erjon Luci & Marta Muco & Elvira Sojli, 2006. "Euroisation in Albania: From Spontaneous to Consensual," wiiw Balkan Observatory Working Papers 71, The Vienna Institute for International Economic Studies, wiiw.
    17. Adamcik, Santiago, 2008. "Sobre la Elección de Regímenes de Tipo de Cambio en Economías Emergentes [On Choosing an Exchange Rate Regimes in Emerging Economies]," MPRA Paper 9329, University Library of Munich, Germany.
    18. Guillermo A. Calvo & Frederic S. Mishkin, 2003. "The Mirage of Exchange Rate Regimes for Emerging Market Countries," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 99-118, Fall.
    19. Roberto Duncan, 2003. "Exploring the Implications of Official Dollarization on Macroeconomic Volatility," Working Papers Central Bank of Chile 200, Central Bank of Chile.
    20. Rodrigo Caputo G. & Igal Magendzo, 2009. "Do Exchange Rate Regimes Matter For Inflation And Exchange Rate Dynamics? The Case Of Central America," Working Papers Central Bank of Chile 517, Central Bank of Chile.
    21. Arslan Razmi, 2022. "Unilateral currency union with a high-income area: the case of Montenegro," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 19(1), pages 31-61, June.

    More about this item

    Keywords

    euroisation; dollarization;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:46537. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.