The Challenge of Economic Rebalancing in Europe
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The Challenge of Economic Rebalancing in Europe

Perspectives for CESEE Countries

Edited by Ewald Nowotny, Doris Ritzberger-Grünwald and Helene Schuberth

In the long aftermath of the acute global financial crisis of 2008/09, “rebalancing” the economy with new sources of growth and productivity remains a persistent necessity. This book addresses the resulting trade-offs and challenges. These needs, and the corresponding policy challenges, are especially prevalent in Europe, in particular Central, Eastern and South-Eastern Europe. On this issue, this book contributes lessons learned from earlier balance sheet recessions. It also addresses the often overlooked link between macroeconomic imbalances and economic inequality. Further contributions focus on the interaction between monetary policy and financial stability, adding a regional perspective to these important issues.
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Chapter 16: The monetary policy framework of the central bank of Montenegro: is financial stability a feasible central bank goal?

Nikola Fabris


The idea of establishing a Central Bank of Montenegro (CBCG) was born in the early twentieth century, but in the end it was the Ministry of Finance rather than a central bank that issued the first Montenegrin money, in 1906. After World War I, Montenegro lost its independence and became a part of the Kingdom of Serbs, Croats and Slovenes, and afterwards of Yugoslavia. Yugoslavia had a dual financial system, consisting of the central monetary institution – the National Bank of Yugoslavia (NBY), which was the core of the system – and six national banks of the member republics. Therefore, the Central Bank of Montenegro existed in this period as an integral part of the NBY framework, with some degree of independence. Its status and functions changed throughout history, but it was essentially never authorized to pursue an independent monetary policy because that authority was in the hands of the National Bank of Yugoslavia, headquartered in Belgrade. After the disintegration of the Socialist Federal Republic of Yugoslavia (SFRY), two former member republics – Montenegro and Serbia – formed the Federal Republic of Yugoslavia (FRY) on 28 April 1992. In the new country, the monetary system was recentralized, with the National Bank of Montenegro losing its autonomy. A high level of monetary and financial centralization was established, providing policy-makers with great leverage for manipulation.

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