Why Slovak monetary-policy charts flatten after 2009: the shift to the ECB

Since January 1, 2009, Národná banka Slovenska has no longer set Slovakia's interest rates or exchange-rate policy; those decisions are made by the European Central Bank's Governing Council for the whole euro area, with NBS acting as the Eurosystem's national implementing arm and contributing one vote among many. That institutional shift shows up directly in Slovakia's long-run indicator charts: before 2009 Slovakia had its own policy rate and a koruna exchange rate that moved with domestic conditions, including a marked appreciation during the mid-2000s convergence boom, while after 2009 its short-term rates simply track the ECB's single policy rate and the exchange-rate line against the euro disappears entirely. This also meant Slovakia absorbed the 2009 global recession, when its GDP contracted by roughly 5%, its deepest since independence, without the option of an independent interest-rate cut or devaluation to cushion the shock, relying instead on fiscal policy and the ECB's euro-area-wide response. NBS's own research on the changeover describes this loss of independent monetary tools as the deliberate trade-off for the credibility and lower borrowing costs euro membership provided.