Credibility and Monetary Policy: The Case of Serbia

Gradimir Kozetinac

Chapter 7 in Serbia and the European Union: Economic Lessons from the New Member States, 2011, vol. 1, pp 105-117 from Institute of Economic Sciences

Abstract: The efforts made by Serbia and other transition economies to control inflation led their central banks to pay close attention to the credibility of their monetary policy, particularly during the last decade. The monetary policy credibility in Serbia has always been a matter of discussion. One of the main indicators of the lack of credibility in Serbia’s monetary policy is a high level of foreign currency deposits in the M3 monetary aggregate caused by high eurization level. The lack of trust by the public in the national currency and its exchange rate is reflected in the large proportion of foreign deposits in the sum of demand deposits and savings and time deposits. Furthermore, the process of indexation of transactions to foreign currency (primarily the euro) is still evident. As the result, the national currency has merely the function of the means of payment and conducting transactions, but lacks the functions of measuring value, saving and crediting. This article considers the concept of credibility from both the theoretical and practical viewpoint. The advantages of high credibility are discussed, with a particular focus on Serbia’s experience with explicit inflation-control targets, and measures taken by the National Bank of Serbia to enhance the credibility of its monetary policy are explained.

Keywords: Monetary policy; credibility; Central Bank; inflation targeting; Serbia (search for similar items in EconPapers)
Date: 2011
ISBN: 978-971-9344-03-9
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.ien.bg.ac.rs/images/stories/download/serbiaeu_ch7.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.ien.bg.ac.rs/images/stories/download/serbiaeu_ch7.pdf [301 Moved Permanently]--> http://ien.bg.ac.rs/images/stories/download/serbiaeu_ch7.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ibg:chaptr:srbeu-7

Access Statistics for this chapter

More chapters in Book Chapters from Institute of Economic Sciences 12 Zmaj Jovina St, 11000 Belgrade, Serbia. Contact information at EDIRC.
Bibliographic data for series maintained by Zorica Bozic ().