Original scientific paper
Choice of optimal exchange rate system For the Republic of Croatia
Dražen Koški
Abstract
The aim of research whose results are presented in this article was to choose the optimal system of exchange
rate for the Republic of Croatia, of course before its accession to EU. The analyzed exchange rate systems here
range from free-floating exchange rate to system without domestic currency in circulation. Naturally, the
classification of International Monetary Fond is included in it. After that, the comparison of basic economic
advantages and disadvantages of the fixed exchange rate in relation to floating exchange rate were carried out.
Although the question is about the extreme systems, disregarding the system without domestic currency in
circulation, their comparison makes possible completely satisfactory basis for the right conclusions on the
choice of optimal exchange rate system for the Republic of Croatia.
Considering its economic particularities, the system of managed-floating exchange rate without proclaimed
exchange direction in advance is certainly optimal for the Republic of Croatia. Namely, within the framework
of this system the limited floating exchange rates decrease the foreign exchange risk allowing to monetary
authorities, at least partly, the independent monetary policy
Keywords
fixed exchange rate; floating exchange rate; exchange rate system; monetary policy trilemma (impossible trinity); Maastricht criteria
Hrčak ID:
42703
URI
Publication date:
10.12.2008.
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