Slovenia’s Monetary and Exchange Rate Framework in the Run-up to ERM II

Abstract

The monetary policy framework in Slovenia has been modified three times since independence in 1991. First, price stabilization was pursued within a framework that relied on monetary targeting (1991–95). After a single-digit inflation level was achieved, the stability of the currency measured in terms of both prices and the real exchange rate was pursued by means of dual targeting of both base money and the exchange rate (1996–2001) although formally monetary aggregates were used as intermediate and operating targets. The last change in the monetary framework, aiming at addressing the persistence of inflation and the EU accession requirements, rests on a framework that uses the exchange rate as a nominal anchor for reducing inflation (2001—).