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A Sustainability Analysis Of Serbia’S Current Account Deficit

  • Srđan Boljanović
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    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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    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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    1. Nouriel Roubini & Paul Wachtel, 1998. "Current Account Sustainability in Transition Economies," NBER Working Papers 6468, National Bureau of Economic Research, Inc.
    2. Joze Mencinger, 2008. "The "Addiction" with FDI and Current Account Balance," ICER Working Papers 16-2008, ICER - International Centre for Economic Research.
    3. Jeffrey A. Frankel & Andrew K. Rose, 1996. "Currency crashes in emerging markets: an empirical treatment," International Finance Discussion Papers 534, Board of Governors of the Federal Reserve System (U.S.).
    4. Aristovnik, Aleksander, 2006. "How sustainable are current account deficits in selected transition economies?," MPRA Paper 485, University Library of Munich, Germany.
    5. 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.
    6. A. Yasemin Yalta, 2011. "Uncovering the Channels through which FDI affects current account: The Case of Turkey," Working Papers 1108, TOBB University of Economics and Technology, Department of Economics.
    7. Joze Mencinger, 2003. "Does Foreign Direct Investment Always Enhance Economic Growth?," Kyklos, Wiley Blackwell, vol. 56(4), pages 491-508, November.
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