Euroization and cyclical stabilization in Montenegro: an empirical analysis
AbstractThe 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.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 46537.
Date of creation: 25 Apr 2013
Date of revision:
Find related papers by 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-27 (All new papers)
- NEP-EEC-2013-04-27 (European Economics)
- NEP-MAC-2013-04-27 (Macroeconomics)
- NEP-MON-2013-04-27 (Monetary Economics)
- NEP-TRA-2013-04-27 (Transition Economics)
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