Coordination of Monetary and Fiscal Policies in Republic of Macedonia

The research investigates the level of coordination of monetary and fiscal policies in the Republic of Macedonia during 1992-2013. The aim is to explore the relationship between the policies, the forms of cooperation, and to determine which policy adjusted with an objective of preserving macroeconomic stability. Assessment of the interactions between the policies and the level of their coordination is performed by applying a couple of approaches: a balance sheet approach, an assessment of the impact of the fiscal and monetary operations on the banking system liquidity, and an assessment of the cyclicality of the policies. The research also investigates the independence of the central bank and institutional design of the budgetary procedures that can shape the fiscal discipline and outcomes and thus the adequacy of the overall macroeconomic policy mix. The research provides some evidence that for most of the years under analysis the fiscal and monetary mix was adequate for preserving macroeconomic stability.