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Power and Weakness of Monetary Policy in Strinking a Balance Between Balance–of-Payments and Inflation-Related Objectives


  • Diana Dragutinovic

    (National Bank of Serbia)


This paper analyzes the effects of different monetary policy transmiss ion channels in Serbia as well as their implications for the current monetary policy framework and instruments. It has become apparent that, for the time being there are two active channels: the exchange rate channel and the expectations channel. Although the effect of transmission of the exchange rate on prices is dominant, the central bank is determined to conduct its monetary policy within the framework of an inflation targeting monetary strategy. In the future, other channels -primarily the interest rate and credit channels – are expected to become active as well. However, it should be said that the use of administrative measures has so far not been efficient in strengthening these channels. The Conclusion of the paper draws attention to the difficulties faced by monetary policymakers in the absence of support from other policies, especially fiscal policy.

Suggested Citation

  • Diana Dragutinovic, 2008. "Power and Weakness of Monetary Policy in Strinking a Balance Between Balance–of-Payments and Inflation-Related Objectives," Working papers 12, National Bank of Serbia.
  • Handle: RePEc:nsb:wpaper:12

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