EVALUATING MONETARY POLICY EFFECTIVENESS IN NORTH MACEDONIA: EVIDENCE FROM A BAYESIAN FAVAR FRAMEWORK

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Magdalena Petrovska Jasna Tonovska Miso Nikolov Artan Sulejmani

Abstract

This paper has adopted a Bayesian FAVAR approach to examine the monetary transmission mechanism in North Macedonia. The model is based on a broad data set that encompasses 140 monthly time series spanning between January 2010 and January 2019. In particular, the impact of policy on bank portfolio variables, and the impact of policy on economic activity variables have been evaluated. Our findings show that monetary tightening, causes a fall in output, inflation rate, employment, bank lending, the stock of government securities held by banks, and equity prices. On the other hand, it increases short-term money market rates, lending rates, deposits, and only in the immediate aftermath of the key policy rate rise, the share of non-performing loans in the loan portfolio. The study is expected to provide useful input to monetary policy implementation in North Macedonia. The study as well enriches the literature in this domain by discussing the challenges facing monetary authorities of small open economies with fixed exchange rate regimes in understanding how their policy instrument work through the economy.

Article Details

How to Cite
Petrovska, M., Tonovska, J., Nikolov, M., & Sulejmani, A. (2022). EVALUATING MONETARY POLICY EFFECTIVENESS IN NORTH MACEDONIA: EVIDENCE FROM A BAYESIAN FAVAR FRAMEWORK. The South East European Journal of Economics and Business, 17(2), 67-82. Retrieved from http://journal.efsa.unsa.ba/index.php/see/article/view/1802
Section
Scientific and Professional papers: Economics and Business
Author Biographies

Magdalena Petrovska, National Bank of the Republic of North Macedonia

Senior Advisor
Monetary Policy and Research Department National Bank of the Republic of North Macedonia
Blvd Kuzman Josifovski Pitu 1; 1000 Skopje Republic of North Macedonia
E-mail: petrovskam@nbrm.mk
ORCID ID: 0000-0001-5939-7987

Jasna Tonovska, Faculty of Economics – Skopje

Teaching and research assistant Department of Foreign Trade
Faculty of Economics – Skopje
Ss. Cyril and Methodius University in Skopje Republic of North Macedonia
E-mail: jasna.tonovska@eccf.ukim.edu.mk ORCID ID: 0000-0002-8150-7633

Miso Nikolov, IUTE Credit Macedonia

Internal Auditor
IUTE Credit Macedonia
Republic of North Macedonia
E-mail: misho.nikolov@iutecredit.mk

Artan Sulejmani, National Bank of the Republic of North Macedonia

Analyst
Monetary Policy and Research Department
National Bank of the Republic of North Macedonia Republic of North Macedonia
E-mail: sulejmania@nbrm.mk
ORCID ID: 0000-0001-6011-8834