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Monetary Effectiveness in Small Transition Economy – The Case of the Republic of Serbia

Author

Listed:
  • Dejan ŽIVKOV

    (Higher School of Professional Business Studies, Novi Sad, Serbia.)

  • Jovan NJEGIĆ

    (Higher School of Professional Business Studies, Novi Sad, Serbia.)

  • Nataša PAPIĆ-BLAGOJEVIĆ

    (Higher School of Professional Business Studies, Novi Sad, Serbia.)

  • Jovan PETRONIJEVIĆ

    (Faculty of Business Economy and Entrepreneurship, Serbia.)

Abstract

This paper examines the factors which influence the effectiveness of central bank in Serbia. Specifically, we have observed the effect of the various macroeconomic variables, inter alia uncovered interest rate parity (UIRP) premium on the monetary policy. The results showed that risk premium, as the balancing value in UIRP, had a significant impact on the monetary policy. The research examined two sub-samples – before and after the world crisis. Before the crisis, central bank could affect its indirect targets, the nominal exchange rate and money supply, via higher interest rate. However, higher interest rate proved inefficient after the crisis, primary due very huge and abrupt depreciation of RSD SVAR model and its impulse response function (IRF) have been used in the paper.

Suggested Citation

  • Dejan ŽIVKOV & Jovan NJEGIĆ & Nataša PAPIĆ-BLAGOJEVIĆ & Jovan PETRONIJEVIĆ, 2016. "Monetary Effectiveness in Small Transition Economy – The Case of the Republic of Serbia," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 5-18, September.
    • Handle: RePEc:rjr:romjef:v::y:2016:i:3:p:5-18
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    References listed on IDEAS

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    More about this item

    Keywords

    risk premium; structural VAR; referent interest rate; Serbia; monetary policy;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics

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