Evaluating Monetary Policy Effectiveness in North Macedonia: Evidence from a Bayesian Favar Framework

Abstract This paper has adopted a Bayesian FAVAR approach to examine the monetary transmission mechanism in North Macedonia. The model is based on broad data set that encompasses 140 monthly time series spanning between January 2010 and 2019. In particular, impact of policy bank portfolio variables, economic activity variables have been evaluated. Our findings show tightening, causes fall output, inflation rate, employment, lending, stock government securities held by banks, equity prices. On other hand, it increases short-term money market rates, lending deposits, only immediate aftermath key rate rise, share non-performing loans loan portfolio. study expected provide useful input implementation as well enriches literature this domain discussing challenges facing authorities small open economies with fixed exchange regimes understanding how their instrument work through economy.