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A Sustainability Analysis Of Serbia’S Current Account Deficit

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  • Srđan Boljanović
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    Abstract

    The global economic crisis have important implications for international capital movements, which further sharpens the question of the sustainability of permanent current account deficits in Southeast Europe. The goal of this paper is to analyse the medium-and long-term sustainability of Serbia’s current account deficit. The first part of the paper presents a factor analysis of the sustainability of Serbia’s current account deficit. In the second part of the paper the theoretical model created by Milesi-Ferretti and Razin is used to access Serbia’s medium-term current account sustainability. On the basis of Reisen’s theoretical work (Reisen methodology) and by adding net reinvested earnings from foreign direct investment to the model, a new (modified) model for assessing the long-term sustainability of a country’s current account deficit is presented. The created model was used for assessing the long-term sustainability of Serbia’s current account deficit.

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    Bibliographic Info

    Article provided by Faculty of Economics, University of Belgrade in its journal Economic Annals.

    Volume (Year): 57 (2012)
    Issue (Month): 195 (October - December)
    Pages: 139-172

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    Handle: RePEc:beo:journl:v:57:y:2012:i:195:p:139-172

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    Related research

    Keywords: sustainable development; current account deficit; foreign debt; solvency;

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    References

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    1. A. Yasemin Yalta, 2012. "Uncovering the channels through which FDI affects current account: the case of Turkey," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, Inderscience Enterprises Ltd, vol. 5(2), pages 158-167.
    2. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency crashes in emerging markets: An empirical treatment," Journal of International Economics, Elsevier, Elsevier, vol. 41(3-4), pages 351-366, November.
    3. Joze Mencinger, 2003. "Does Foreign Direct Investment Always Enhance Economic Growth?," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 56(4), pages 491-508, November.
    4. Nouriel Roubini & Paul Wachtel, 1997. "Current Account Sustainability in Transition Economies," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 97-03, New York University, Leonard N. Stern School of Business, Department of Economics.
    5. Joze Mencinger, 2008. "The "Addiction" with FDI and Current Account Balance," ICER Working Papers, ICER - International Centre for Economic Research 16-2008, ICER - International Centre for Economic Research.
    6. Aristovnik, Aleksander, 2006. "How sustainable are current account deficits in selected transition economies?," MPRA Paper 485, University Library of Munich, Germany.
    7. Fernando Seabra & Lisandra Flach, 2005. "Foreign direct investment and profit outflows: a causality analysis for the Brazilian economy," Economics Bulletin, AccessEcon, vol. 6(1), pages 1-15.
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    Cited by:
    1. Nkuna, Onelie, 2013. "Sustainability of the Malawian Current Account Deficit: Application of Structural and Solvency Approaches," MPRA Paper 51919, University Library of Munich, Germany.

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