Citation:

Mehdi Mohebi. "Monetary Policy and Unemployment Behavior: The Case of Croatia" International Research Journal of Economics and Management Studies, Vol. 3, No. 5, pp. 234-239, 2024.

Abstract:

Monetary policy is the main channel through which, in the short-run, real economic variables can be targeted through the Taylore rule, and Central Banks can influence real variables like unemployment and economic growth by implementing sound monetary policy. This relationship happens with the inflation rate mechanism through the Philips Curve; when monetary policy is implemented, it will have an impact on the real production level via the change in unemployment. In this study, an SVAR model of the money market is estimated for the Croatian economy to see how growth will respond to changes in the unemployment rate. According to the results from the empirical model, monetary policy will affect unemployment rates only in the short run by the coefficient of 0.76 and in the long run it fails to explain the variations in the croatia’s production and economic growth. In fact, when implementing monetary policy, by 1 percent change in monetary aggregates, the unemployment rate will change by 0.76 percent, and this effect tends to be short-run than the long-run, according to Impulse Response analysis.

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Keywords:

Structural VAR; monetary policy; unemployment; Taylor rule.