Catching-up Strategies in CESEE Economies
Edited by Ewald Nowotny, Peter Mooslechner and Doris Ritzberger-Grünwald
Chapter 15: Monetary Policy Challenges in the CESEE Region – the Case of Croatia
15. Monetary policy challenges in the CESEE region – the case of Croatia Boris Vujčić In terms of monetary policy challenges, this chapter will look into three things, the first being price stability, that is, a constitutional primary mandate that the central bank has to fulfil. After the financial and economic crisis of 2008, price stability was not a big concern. Times of crisis have quickly removed our primary goal from the list of our main preoccupations. Inflationary pressures were subdued due to the recession, which came with a sharp decline in both foreign and domestic demand. So, central banks focused on reigniting demand, while price developments were not really a challenge. However, it could well be that crisis has only temporarily interrupted a trend of inflationary pressures that will continue once the recovery of the (world) economy accelerates. I remember that, just as the crisis was starting, in 2008, I participated in two conferences that dealt with the question of rising inflationary pressures and renewed concern about price developments. There was much worry that we might see a resurgence of high inflation, particularly in countries with a high weight of food and energy prices in the Consumer Price Index (CPI) basket (see IMF, 2008). In Croatia we also experienced a sharp increase in CPI inflation during 2008 (Figure 15.1). The fact that we dropped into a deep recession and stopped worrying about inflation immediately after this episode might well turn out to be just a temporary phenomenon. A potential...
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