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The impact of monetary policy and exchange rate regime on real GDP and prices in the Republic of Macedonia

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Author(s): Besnik Fetai | Zeqiri Izet

Journal: Economic and Business Review
ISSN 1580-0466

Volume: 12;
Issue: 4;
Start page: 263;
Date: 2010;
Original page

ABSTRACT
This paper investigates the relative costs and benefits associated with introducing a more active monetary and a different exchange rate regime in the Republic of Macedonia. In this finding, the econometrics result show that introducing a more active monetary policy and a different strategy of the exchange rate targeting in order to promote rapid economic growth could easy disturb macroeconomic stability (after having achieved it at a substantial cost) without any significant economic benefits. Therefore, introducing a more active monetary policy and a different strategy of the exchange rate regime is likely to incur more costs than benefits, since changes of the monetary policy and exchange rate regime type do not show a persistent effect on real GDP, while changes of money stock and exchange rate regime do show a strong and persistent effect on prices level.

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