Monetary Policy in a Highly Euroized Economy

Part of the New Perspectives on South-East Europe book series (NPSE)


In this chapter the authors trace the evolution of Croatian monetary policy since independence to the present day. Its aim is to systematically describe and explain a plethora of monetary and macroprudential policy instruments and tools the Croatian National Bank (CNB) used from the moment it was founded, throughout its harmonization with the EU legislative framework, and to explain its future prospects and monetary policy goals. The authors empirically examine deposit and credit financial euroization, as well as associated balance sheet vulnerabilities that pose significant exchange rate and currency-induced credit risks. To demonstrate the potential impact of currency mismatches, authors analyze the case of loans indexed to the Swiss franc. The chapter concludes by a simple econometric analysis of the sensitivity of the nominal HRK/EUR exchange rate, short- and long-term interest rates and investment to foreign exchange rate interventions. This demonstrates the effectiveness of the main monetary policy instrument in Croatia—occasional and unannounced foreign exchange intervention.


Monetary Policy Croatian National Bank (CNB) FX Interventions Current Mismatch Macroprudential Policy 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


  1. Baletić, Z., & Zdunić, S. (1999). Stanje hrvatskog gospodarstva i izbor razvojne strategije. In Z. Baletić (Ed.), Hrvatsko gospodarstvo u tranziciji (pp. 203–220). Zagreb: Institute of Economics.Google Scholar
  2. Benazić, M., & Rami, J. (2016). Monetary Policy and Unemployment in Croatia. Economic Research – Ekonomska istraživanja, 29(1), 1038–1049.CrossRefGoogle Scholar
  3. Bokan, N., Grgurić, L., Krznar, I., & Lang, M. (2010). Utjecaj financijske krize i reakcija monetarne politike u Hrvatskoj. Zagreb: Hrvatska narodna banka.Google Scholar
  4. Brkić, L., & Kotarski, K. (2009). Euroization, Monetary Union and the Credibility of Monetary Policy. Annals of the Croatian Political Science Association, 5(1), 443–460.Google Scholar
  5. Brown, M., & Stix, H. (2014). The Euroization of Bank Deposits in Eastern Europe. University of St. Gallen, School of Finance Research Paper No. 2014/12. Downloaded 20 July 2017.
  6. Brunnermeier, M. K., & Sannikov, Y. (2016). The I Theory of Money. Downloaded 24 July 2017.
  7. Deskar Škrbić, M. (2017). Hrvatska i euro II: sažeta Cost-Benefit analiza. Downloaded 30 July 2017.
  8. Družić, I., Tica, J., & Arčabić, V. (2016). Ekonomski razvoj i gospodarske krize. In A. Obadić & J. Tica (Eds.), Gospodarstvo Hrvatske (pp. 1–40). Zagreb: Ekonomski fakultet Sveučilišta u Zagrebu.Google Scholar
  9. Faulend, M., Šošić, V., & Žigman, A. (2000). Inflacija i neovisnost središnje banke – završena priča? Financijska teorija i praksa: časopis za financijsku teoriju i praksu, 24(1), 41–64.Google Scholar
  10. Garriga, A. C. (2016). Central Bank Independence in the World A New Dataset. International Interactions, 42(5), 849–868.CrossRefGoogle Scholar
  11. Globan, T. (2017). O “pogrešnom” tečaju i zašto nam izvoz raste. Downloaded 1 August 2017.
  12. HGK. (2016). ‘Očekivanja poslovnog sektora u 2017. godini, Istraživanje Eurochambres Economic Survey 2017’. Downloaded 1 August 2017.
  13. IMF. (2008). Croatia: Article IV Consultation. IMF Country Report 8-158.Google Scholar
  14. Ivanov, M. (2014). Kontraciklička monetarna politika u Hrvatskoj. In G. Družić & I. Družić (Eds.), Zbornik radova znanstvenog skupa Razvojni potencijali hrvatskog gospodarstva (pp. 77–98). Zagreb: HAZU i EFZG.Google Scholar
  15. Kraft, E. (2003). Monetary Policy Under Dollarisation: The Case of Croatia. Comparative Economic Studies, 45(3), 256–277.CrossRefGoogle Scholar
  16. Kraft, E., & Galac,T. (2011). Macroprudential Regulation of Credit Booms and Busts: The Case of Croatia. The World Bank Policy Research Working Paper 5772. Downloaded 2 August 2017.
  17. Kraft, E., & Jankov, L. (2005). Does Speed Kill? Lending Booms and Their Consequences in Croatia. Journal of Banking & Finance, 29(1), 105–121.CrossRefGoogle Scholar
  18. Lang, M., & Krznar, I. (2004). Transmission Mechanism of Monetary Policy in Croatia. The 10th Dubrovnik Economic Conference.Google Scholar
  19. Ötker-Robe, İ., Polański, Z., Topf, B., & Vávra, D. (2007). Coping with Capital Inflows: Experiences of Selected European Countries. IMF WP/07/190. Downloaded 3 August 2017.
  20. Radošević, D. (2011). Neizvjesnost i anticiklična monetarna politika. In D. Jakovčević, I. Lovrinović, & D. Radošević (Eds.), Novac i ekonomski rast: Monetarna politika ekonomskog rasta i zaposlenosti (pp. 25–39). Zagreb: Ekonomski fakultet Zagreb.Google Scholar
  21. Šonje, V., & Vujčić, B. (2000). Hrvatska u drugoj fazi tranzicije 1994.–1999. Zagreb: Hrvatska narodna banka.Google Scholar
  22. Tica, J. (2009). Tranzicijska ekonomika tečaja i hrvatsko gospodarstvo. Zagreb: Politička kultura.Google Scholar
  23. Tkalec, M., & Verbič, M. (2013). A New Look into the Prevalence of Balance Sheet or Competitiveness Effect of Exchange Rate Depreciation in a Highly Euroised Economy. Post-Communist Economies, 25(2), 225–240.CrossRefGoogle Scholar
  24. Tkalec, M., & Vizek, M. (2009). The Impact of Macroeconomic Policies on Manufacturing Production in Croatia. Privredna kretanja i ekonomska politika, 19(121), 61–92.Google Scholar
  25. Tkalec, M., Vizek, M., & Verbič, M. (2014). Balance Sheet Effects and Original Sinners’ Risk Premiums. Economic Systems, 38(4), 597–613.CrossRefGoogle Scholar
  26. Vujčić, B. (2003). Monetary Policy and Management of Capital Flows in a Situation of High Euroisation – The Case of Croatia. BIS Papers No. 17. Downloaded 3 August 2017.
  27. Vujčić, B., & Dumičić, M. (2016). Managing Systemic Risks in the Croatian Economy. BIS Papers No. 86. Downloaded 3 August 2017.


  1. The World Bank (2017a). Bank nonperforming loans to total gross loans (%). Downloaded 5 August 2017.
  2. The World Bank (2017b). Current account balance (% of GDP). Downloaded 4 August 2017.

Copyright information

© The Author(s) 2019

Authors and Affiliations

  1. 1.Faculty of Political ScienceUniversity of ZagrebZagrebCroatia
  2. 2.The Institute of EconomicsZagrebCroatia

Personalised recommendations