Coordination between the monetary and public debt management policies in Croatia

Abstract

This paper explains the main characteristics of and prerequisites for coordination between the measures and instruments of monetary and public debt management policies in Croatia and evaluates current practice, particularly over the last two recession years. Attention is drawn to the importance of coordination for achieving macroeconomic stability and to the main problems and challenges obstructing successful coordination. It is assessed that the Croatian National Bank (CNB), with its measures and instruments, has consistently contributed to improving coordination with the public debt management policy, despite the narrowing of its room for manoeuvre due to a complex economic environment and the specific functioning of the transmission mechanism of monetary policy. Notwithstanding some contribution to coordination made by the Government and Ministry of Finance, they must take measures and employ instruments to make more significant adjustments and, together with the CNB, define an optimum fiscal and monetary policy mix for the future that will ensure stable economic growth. This paper gives an overview of major CNB measures aimed at facilitating the public debt management and improving coordination with the Ministry of Finance, and presents a detailed analysis of open market operations. It also points to a certain contribution of the Ministry of Finance to the coordination improvement, indicating major barriers to effective coordination between these important policies.