Monetary policy instruments in Slovenia

The monetary policy process has two stages: (1) setting the value of interm ediate or final monetary targets on the basis of available information, and (2) setting the instruments of monetary policy in order to neutralize stoc hastic disturbances and to render the actual value of the intermediate targ et as close as possible to the targeted value. After becoming independent, Slovenia had to establish an independent central bank and create effective instruments of monetary policy. Slovenia did away with the nonmarket instru ments of monetary policy that were used in the former Yugoslavia. Old, sele ctive instruments of monetary policy were replaced by new instruments: an o pen market policy, Lombard loans, minimum reserve requirements, bills with warrants, twin bills, and foreign currency bills. Slovenia must use open-ma rket policy instruments as the core instrument, the fiscal component should be eliminated, minimum reserve requirements should not change frequently d ue to fluctuations deriving from reserve ratio movements; refinancing polic y should have a safety valve function to satisfy unexpected demand for the central bank's money.