CROATIAN KUNA: MONEY, OR JUST A CURRENCY? EVIDENCE FROM THE INTERBANK MARKET

Davor Mance (davor.mance@efri.hr), Bojana Olgic Drazenovic and Stella Suljic Nikolaj
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Davor Mance: Faculty of Economics and Business, University of Rijeka, Croatia
Bojana Olgic Drazenovic: Faculty of Economics and Business, University of Rijeka, Croatia
Stella Suljic Nikolaj: Faculty of Economics and Business, University of Rijeka, Croatia

UTMS Journal of Economics, 2019, vol. 10, issue 2, 149-161

Abstract: Modern sovereign money is accepted as an institution in virtue of the collective intentionality of the acceptance of the sovereign status function declaration it being the official currency of a country. A status function declaration may not create money it may only create a currency. How does one test the fact that an official currency also has all the properties of money? We propose a rather simple test based on the Granger causality of the acceptance of a currency in virtue of money if, and only if, the allocation function of its market interest rate is not rejected. This condition is fulfilled if the interest rate is its genuine allocator. This is the case if the changes in quantity cause the change in the interest rate as a price of money i.e. its true opportunity cost. We find that market interest rate changes are Granger caused by changes in quantities of traded euros on the overnight banking market but not by changes in the quantity of traded Croatian kuna. Thus, the Croatian kuna is only the domestic currency of Croatia, and the euro is its true money.

Keywords: money; functions; euroization:; ZIBOR:; Granger; causality (search for similar items in EconPapers)
JEL-codes: E31 E43 E47 E52 G17 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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