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Monetary Policy versus Structural Reforms: The Case of Croatia


  • Vidakovic, Neven
  • Radošević, Dubravko


Over the course of the recession during the last six years, central bank officials in Croatia have on numerous occasions stated there is a strong need for structural reforms in Croatia and that there is no need for monetary policy reforms. This short paper investigates why the CNB is only demanding fiscal reforms (i.e. internal devaluation) and is not offering any monetary reforms (conventional or unconventional monetary policy responses). Over the course of the last 15 years CNB has caused several structural changes that lead to financial instability. This paper reviews three main structural changes initiated by the central bank, i.e. structural changes of: credit policy of the banking system, development in the external indebtedness and central bank independence. The modern monetary theories and new central bank strategies imposed new views on central bank policy measures. We suggest several financial sector and central banking reforms in Croatia, including accession of Croatia to SSM, the first pillar of EU banking union.

Suggested Citation

  • Vidakovic, Neven & Radošević, Dubravko, 2014. "Monetary Policy versus Structural Reforms: The Case of Croatia," MPRA Paper 63955, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:63955

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    References listed on IDEAS

    1. McLeay, Michael & Radia, Amar & Thomas, Ryland, 2014. "Money creation in the modern economy," Bank of England Quarterly Bulletin, Bank of England, vol. 54(1), pages 14-27.
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    Cited by:

    1. Oliver Falck & Siegfried Schönherr, 2016. "Eine Agenda für Wirtschaftsreformen in Kroatien: ein umfassendes wirtschaftspolitisches Reformpaket im Auftrag der kroatischen Staatsstiftung," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 70.

    More about this item


    deposit interest rate; probability of default; banks;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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