DEC XVII DUBROVNIK 30 6 11 TOMISLAV GALAC

DEC XVII DUBROVNIK, 30. 6. 11 TOMISLAV GALAC AND EVAN KRAFT “Monetary and financial policies for ‘de-euroization’ -a case study of Croatia” COMMENT by Oleh Havrylyshyn

CONTRIBUTION OF PAPER • UNLIKE MANY STUDIES PAPER CONSIDERS BOTH FE ELEMENTS( CE, DE)THEIR LINKAGESESP 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. 2

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 3

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? 4

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 ? . 5

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 6

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…. . 7

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 8