Macedonia has enjoyed price stability, but not growth during transition, say Vladimir Gligorov and Silvana Mojsovska in their paper published by the Vienna Institute for International Economic Studies (wiiw). As a consequence, it has a very high unemployment rate. Thus, prudent demand management has not led to a positive supply response. The macroeconomic policy mix chosen in 1994 and followed since then was adequate for stability but not for growth. Macedonia opted for a very strict fixed peg to the German mark and then to the euro. It devalued its currency, the denar, only once, in 1997. It supported the exchange rate with a restrictive monetary policy that kept interest rates high. Both proved to put up obstacles to internal and external liberalization. In addition, a policy of fiscal restraint was pursued, except for occasional surges in discretionary spending that required fiscal adjustments later on. Thus, the macroeconomic policy was not suited to a country that faced significant shocks because it effectively left Macedonia without any shock absorbers.