AN OPTIMAL MACRO ECONOMIC POLICY MIX FOR SLOVENIA AFTER EU ACCESSION

Abstract

This paper analyses the design of macroeconomic policies for Slovenia during the process of full integration into the European Economic and Monetary Union (EMU). “Optimal” monetary and fiscal policies are determined as solutions of optimum control problems with a quadratic objective function and the macroeconometric model SLOPOL as constraint. Several optimization experiments under a flexible exchange rate, a fixed exchange rate and a crawling peg scenario are carried out. It is shown than the best policy results are obtained under a crawling peg regime with a decreasing depreciation rate.