engleski

Empirical analysis of monetary policy: Croatia vs. Slovenia

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

real exchange rate; monetary policy; exports

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