SINGLE MONETARY POLICY VERSUS MACROECONOMIC FUNDAMENTALS IN SLOVAKIA

• Authors: Sinicaková Marianna , Gavurová Beata
• Languages of publication: EN

Abstracts

EN

After introduction of Euro since January 2009 the Slovak Republic does not perform its independent monetary policy but is affected by the Euro area policy including common interest rates. Interbank interest rate is considered as a proxy-variable aggregating overall monetary policy setting. The objective of the paper is to evaluate compatibility of the Euro area interest rates with macroeconomic situation in Slovakia. In other words, the key question is whether common interest rates respond sufficiently to inflation gap, output gap or other indicators. Reaction function is estimated via linear regression with the Newey-West approach for the pre-Euro period as well as Euro period in the Slovak Republic. Results demonstrate that the Euro area interbank interest rates did not react sufficiently neither to Slovak inflation nor output gap. These led to extremely low inflation during last month approaching the critical point of deflation with possible negative impacts on Slovak economy.

Keywords

EN

INTEREST RATES; MONETARY RULES; OUTPUT GAP; INFLATION GAP; SLOVAKIA

• Publisher: Institute of Slovak and World Economics and Institute for Forecasting, Slovak Academy of Sciences
• Journal: Ekonomický časopis (Journal of Economics)
• Year: 2017
• Volume: 65
• Issue: 2
• Pages: 158 – 172

Contributors

author

Sinicaková Marianna

• Technical University of Košice, Faculty of Economics, Department of Finance, Němcovej 32, 040 01 Košice, Slovak Republic

author

Gavurová Beata