Title: Is monetary policy possible without an issuance function: the case of Montenegro

Authors: Nikola Fabris, Zorica Kalezic

Addresses: Faculty of Economics, Central Bank of Montenegro and Belgrade University, Kamenicka 6, 11000 Belgrade, Serbia. ' Central Bank of Montenegro, Bul Sv. Petra Cetinjskog 6, 81 000 Podgorica, Montenegro

Abstract: Since the end of 1999, Montenegro belongs to a group of dollarised economies. The process of dollarisation in Montenegro has had positive implications on economic performance. However, by renouncing the issuance function, the country gave up some significant monetary policy attributes. Since the Central Bank of Montenegro has a certain number of monetary policy instruments at its disposal such as reserve requirement policy, short-term liquidity loans, possibility of conducting open market operations and a potential role of the lender of last resort, this begs the question whether it possible to perform independent monetary policy under such conditions.

Keywords: dollarisation; monetary policy; Montenegro; reserve requirement; economic performance; issuance function; short-term liquidity loans; open markets; lender of last resort; central bank.

DOI: 10.1504/IJEPEE.2008.021282

International Journal of Economic Policy in Emerging Economies, 2008 Vol.1 No.4, pp.356 - 375

Published online: 16 Nov 2008 *

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