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Optimal Exchange Rate and Fiscal Policies for Slovenia on its Way into the Euro Area

Author

Listed:
  • Reinhard Neck

    (Klagenfurt University, Austria)

  • Gottfried Haber

    (Klagenfurt University, Austria)

  • Klaus Weyerstrass

    (IHS Vienna, Austria)

Abstract

This paper analyzes the design of macroeconomic policies for Slovenia on its way into the Euro Area. We simulate different policy scenarios, distinguishing in particular between different exchange rate regimes. For this purpose, we use the model SLOPOL4, a macroeconometric model for Slovenia. We determine ‘optimal’ exchange rate and fiscal policies for Slovenia as solutions of optimum control problems with a quadratic objective function and the model slopol4 as a constraint. Several optimization experiments are carried out under different assumptions under a fixed exchange rate, a flexible exchange rate and a crawling peg regime approximating Slovenia’s entry into the Euro Area. The sensitivity of the results is examined with respect to several assumptions.

Suggested Citation

  • Reinhard Neck & Gottfried Haber & Klaus Weyerstrass, 2012. "Optimal Exchange Rate and Fiscal Policies for Slovenia on its Way into the Euro Area," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 10(3 (Fall)), pages 231-243.
    • Handle: RePEc:mgt:youmgt:v:10:y:2012:i:3:p:231-243
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    File URL: http://www.fm-kp.si/zalozba/ISSN/1581-6311/10_231-243.pdf
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    References listed on IDEAS

    as
    1. Reinhard Neck & Gottfried Haber & Klaus Weyerstrass, 2010. "Optimal Deterministic and Stochastic Macroeconomic Policies for Slovenia: An Application of the OPTCON Algorithm," Computational Economics, Springer;Society for Computational Economics, vol. 36(1), pages 37-45, June.
    2. Petit,Maria Luisa, 2009. "Control Theory and Dynamic Games in Economic Policy Analysis," Cambridge Books, Cambridge University Press, number 9780521127158.
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    Cited by:

    1. Klaus Weyerstrass & Daniela Grozea-Helmenstein, 2013. "Euro Area Scenarios and their Economic Consequences for Slovenia and Serbia," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 11(4 (Winter), pages 323-351.

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    More about this item

    Keywords

    optimal control; econometric model; macroeconomic policy; Slovenia; sensitivity analysis;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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