Monetary Policy of the National Bank of Slovakia

19 Pages Posted: 2 Sep 2009

See all articles by Karol Szomolányi

Karol Szomolányi

University of Economics in Bratislava - Department of Operations Research and Econometrics

Martin Lukacik

University of Economics in Bratislava - Department of Operations Research and Econometrics

Adriana Lukacikova

University of Economics in Bratislava - Department of Operations Research and Econometrics

Date Written: September 2, 2009

Abstract

Following Surico (2007a, b), we analyse the monetary policy of the National Bank of Slovakia (NBS). We can verify by mentioned approach potential asymmetries in preferences of the monetary authority as well as potential nonlinearity in the economic structure. If a monetary policymaker has asymmetric preferences for the output stability, he cannot commit his policy. Such policymaker has the known time-consistency problem and systematically produces an inflation bias. Our conclusions can be interpreted in the frame of the discussion about prospects of the future membership of Slovak economy in European Monetary Union (EMU).

By our analysis Slovak monetary authority responses more strictly when the level of the nominal interest rate is higher than target. Even if the average target policy rate of NBS was about five percent, the average interest rate in Slovakia was about ten percent. The difference of about five percent was caused by mentioned tendency of NBS. Preferences of NBS for both output and inflation stabilisation were symmetric. Slovak monetary policy therefore does not produce an inflation bias.

Keywords: time consistency of the monetary policy, National Bank of Slovakia. asymmetric preferences. European Monetary Union. GMM

JEL Classification: C12, C13, E52, E58

Suggested Citation

Szomolányi, Karol and Lukacik, Martin and Lukacikova, Adriana, Monetary Policy of the National Bank of Slovakia (September 2, 2009). Available at SSRN: https://ssrn.com/abstract=1466832 or http://dx.doi.org/10.2139/ssrn.1466832

Karol Szomolányi (Contact Author)

University of Economics in Bratislava - Department of Operations Research and Econometrics ( email )

Dolnozemská cesta 1
Bratislava, 852 35
Slovakia

Martin Lukacik

University of Economics in Bratislava - Department of Operations Research and Econometrics ( email )

Dolnozemská cesta 1
Bratislava, 852 35
Slovakia

Adriana Lukacikova

University of Economics in Bratislava - Department of Operations Research and Econometrics

Dolnozemská cesta 1
Bratislava, 852 35
Slovakia

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