In this graduation thesis the impact of the exchange rate on the GDP in the Republic of Croatia is being researched. Furthermore, the exchange rate policy of Croatian National Bank is being closely inspected with the purpose of achieving its main goal – the stability of prices, but also the secondary goals of the monetary policy. The thesis shows types of foreign exchange rates regarding its most important characteristics. In addition, the efficiency of choosing a system operated by managed floating exchange rate is being assessed in consideration of the characteristics of the financial and real economy sector in the Republic of Croatia. Moreover, the thesis appraises the value of the exchange rate of kuna in relation to euro, as well as the efficiency of the exchange rate channel as the mechanism of the monetary transmission. It analyses the impact of depreciation of the exchange rate on export, through the effect of competitiveness, and also on the consumption, through the wealth effect and their overall effect on GDP in the Republic of Croatia. Taking into account the characteristics of Croatian economy, the results of this thesis show that the overall effect of the depreciation of exchange rate doesn’t increase but impact the decrease of the GDP in the Republic of Croatia. Further, a small, opened and highly euroised country like Croatia, characterized by high import subordination, large foreign debt and indebtedness of all sectors in foreign currency is simply forced to maintain a stable exchange rate of kuna in regards to euro because of the extremely high sensibility of all sectors to the change of rate.