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Empirical analysis of monetary policy: croatia vs. Slovenia

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  • Vidakovic, Neven

Abstract

This paper tries to explain empirical causation between the exports and the real exchange rate. The paper develops a simple model, the model is based on the relationship of exports to: real interest rates differential, foreign demand for domestic goods and real exchange rate. The paper then tests the model with the empirical data from Croatia and Slovenia. The empirical analysis in the paper finds: there is very limited relationship between real interest rates differentials, foreign demand and exports. However there is a strong relationship between exports and the real exchange rate. When empirically tested the model confirms the monetary policy of sliding exchange rate in Slovenia was vastly superior to the monetary policy of fixed exchange rate in Croatia .

Suggested Citation

  • Vidakovic, Neven, 2007. "Empirical analysis of monetary policy: croatia vs. Slovenia," MPRA Paper 63960, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:63960
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    References listed on IDEAS

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    5. Ben S. Bernanke & Jean Boivin & Piotr Eliasz, 2005. "Measuring the Effects of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(1), pages 387-422.
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    More about this item

    Keywords

    real exchange rate; monetary policy; exports;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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