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Monetary Policy under Dollarisation: The Case of Croatia

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  • Evan Kraft

    ()
    (Research Department, Croatian National Bank, Trg Burze 3, 10002 Zagreb, Croatia.)

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    Abstract

    Despite almost 10 years of low inflation, Croatia continues to experience high levels of dollarisation/‘euroisation’. Roughly, three-quarters of bank deposits and currency in circulation are held in foreign currency. This limits the manoeuvering room for monetary policy. Banks try to avoid balance sheet mismatches by indexing lending to the exchange rate, but this creates credit risk. In addition, strong currency depreciation could lead to flight from the currency, and inflation pass-through, while apparently moderate in recent years, could easily become a problem. Policy options, including adopting the Euro as the official currency, inflation targeting, and the present policy of a limited dirty float, are discussed. Comparative Economic Studies (2003) 45, 256–277. doi:10.1057/palgrave.ces.8100023

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal Comparative Economic Studies.

    Volume (Year): 45 (2003)
    Issue (Month): 3 (September)
    Pages: 256-277

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    Handle: RePEc:pal:compes:v:45:y:2003:i:3:p:256-277

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    Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK
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    Cited by:
    1. Mathilde Maurel, 2004. "Financial Integration, Exchange Rate Regimes in CEECs, and joining the EMU : Just Do It," Sciences Po publications n°650, Sciences Po.
    2. repec:onb:oenbwp:y:2008:i:1:b:1 is not listed on IDEAS
    3. Maurel Mathilde, 2004. "Financial integration, exchange rate regimes in CEECs, and joining the EMU : Just do it..," Cahiers de la Maison des Sciences Economiques j04027a, Université Panthéon-Sorbonne (Paris 1).
    4. Vlastimir Vukovic & Aleksandar Zdravkovic, 2011. "The Inflation and Exchange Rate in the Five Balkan Countries from Maastricht Convergence Criteria Prospect," Book Chapters, Institute of Economic Sciences.
    5. repec:onb:oenbwp:y::i:159:b:1 is not listed on IDEAS
    6. Stix, Helmut & Scheiber, Thomas, 2009. "Euroization in Central, Eastern and Southeastern Europe – New Evidence On Its Extent and Some Evidence On Its Causes," Working Papers 159, Oesterreichische Nationalbank (Austrian Central Bank).
    7. Scheiber, Thomas & Ritzberger-Grünwald, Doris, 2012. "Euro Cash in Central, Eastern and Southeastern Europe," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 41–55.

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