DEC XVIIDUBROVNIK,30.6.11

TOMISLAV GALAC AND EVAN KRAFT

“Monetary and financial policies for ‘de-euroization’

-a case study of Croatia”

COMMENT by Oleh Havrylyshyn

2

CONTRIBUTION OF PAPER• UNLIKE MANY STUDIES PAPER CONSIDERS

BOTH FE ELEMENTS( CE, DE)THEIR LINKAGES-ESP DE CAUSING CE

• WISELY FOCUSES ON THE RISKIER ONE –CE.• BESIDE THE CONVENTIONAL DETERMINANTS

(STABILITY, INTEREST, ER POLICY ) , PAPER GIVES DETAILED INSIGHT INTO 10 VERY NARROW DIRECT REGULATORY INSTRUMENTS OF CB,POINTS TO RELATIVE IMPORTANCE

• PROVIDES MANY INTERESTING FINDINGS: e.g. ER stab.policy may raise FE at first, but eventually pays off, and it falls again.

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MAIN ISSUES TO ADDRESS

• WHERE IS FINANCIAL DEPTH IN ALLTHIS ?

• DEEPER ANALYSIS, SENSITIVITY TESTS FOR REGULATORY INSTRUMENTS

• CLARIFY DOLLAR/ EURO PORTIONS AND ASK IF THE CHANGE MATTERS

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WHERE IS FINANCIAL DEPTH ?

• NO VAR FOR FINDEPTH? WHY?

• DOES INTEREST SPREAD PROXY THIS?

• IS THAT ENOUGH?

• SURELY FINDEPTH INCREASED AND WAS IMPORTANT IN PROCESS?

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REGULATORY MEASURES OF HNB- MEASURING,INTERPRETING • NUMBER OF REGULATORY INSTRUMENTS

VERY LARGE, NOT EASY TO HAVE CARDINAL MEASURES , INTER-DEPENDENT EFFECTS

• UEFUL TO HAVE MORE DETAIL ON HOW THIS VAST TASK WAS HANDLED, WHY JUST DUMMIES WHEN SOME (RR), (KHR) HAVE CARDINAL VALUE?WHICH CONCLUSIONS HAVE HIGH CONFIDENCE, WHICH NOT ?.

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REGULATORY MEASURES.2

• ONE APPROACH IS TO DO A LITLE MORE EXPERIMENTATION, SENSITIVITY IN SPECIFYING THESE VARIABLES.

• ANOTHER MAY BE TO RETURN TO THE QUALITATIVE ANALYSIS OF Sec.4 DEFINING THESE VARIABLES AND TELL FULLER STORIES BASED ON ECONOMETRIC RESULTS.

• EXAMPLE OF ABOVE: DESPITE EVASION PROBLEM FOR FCLR IT SEEMS ONE OF MOST IMPORTANT AND EFFECTIVE : EXPAND QUALITATIVE EXPLANATION

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EUROIZATION OR DOLLARIZATION

• BOTH TERMS MEAN THE SAME, BUT AWKWARD AND PARTIAL; CENTRAL EUROPE SINCE 2000 EUROIZATION MAKES SENSE

• BUT CROATIAN HAS A BETTER WORD FOR IT: VALUTIZACIJA (and a local literature” !!-Pertot (1980), Teorija Dispariteta Troskova, Cijena i Valuta”)

• THIS IS MERE TERMINOLOGY; MORE IMPORTANT…..

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EURO/DOLLAR RATIO?• PRESUMABLY ROLE OF EURO IN

“VALUTIZATION” INCREASED-USEFUL TO AT LEAST KNOW THIS.

• EVEN MORE USEFUL IS TO ASK : DOES IT MATTER FOR ECONOMETRIC RESULTS ?

• GLOBALLY, IN RECESSION YEARS TRADITIONAL FLOW INTO DOLLARS ROSE DESPITE SEVERE US CRISIS. DID THE SAME HAPPEN IN CENTRAL EUROPE, CROATIA? EURO-PERIPHERY CRISIS MIGHT SUGGEST YES—THIS MERITS ATTENTION