Prague Economic Papers 2003, 12(3):217-232 | DOI: 10.18267/j.pep.215

Bank of slovenia adjustment policy to surges in capital flows

®an Oplotnik
Economic Institute of the Law School, Pre¹ernova 21, 1000 Ljubljana, Slovenia, and Faculty of Bussines and Economics, University of Maribor, Razlagova 14-20, 2000 Maribor, Slovenia (e-mail: oplotnik@yahoo.com).

The article presents an empirically tested assessment of the Bank of Slovenia (BS), national central bank, adjustment policy to surges in capital flows during the last decade. Exchange rate appreciation, undeveloped banking sector, immoderate money market oscillation, unstable economic trends (all phenomena that can also be found in other transition countries) are just some of the detrimental effects that can be provoked by surges in capital flows if the national economy is faced with some fundamental sectoral deficiencies. Empirical results indicated that BS quite successfully mitigated listed effects of excessive foreign currency inflows during the last decade. With the suitable combination of direct and indirect adjustment methods, BS succeeded in preventing, still vulnerable Slovenian economy from a major form of financial crisis and stronger nominal tolar appreciation (this was not the case in some other countries like Hungary, Poland, Czech Republic, Croatia) although there was some real appreciation.

Keywords: capital flows, central bank policy, exchange rate regime, appreciation, capital controls, problems of transition
JEL classification: C10, C13, E58, F31, F32, F36, G18

Published: January 1, 2003  Show citation

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Oplotnik, ®. (2003). Bank of slovenia adjustment policy to surges in capital flows. Prague Economic Papers, 12(3), 217-232. doi: 10.18267/j.pep.215
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