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Bilateral Trade Elasticity of Serbia and Her Trading Partners

Author

Listed:
  • Kurtovic Safet

    (Faculty of Management and Business Economics, University of Travnik, Aleja Konzula 5, Travnik, 72270, Bosnia and Herzegovina)

  • Halili Blerim
  • Maxhuni Nehat

    (Faculty of Engineering Management, University „Union – Nikola Tesla“, Bulevar vojvode Mišića 43, 11000, Belgrade, Serbia)

Abstract

Almost all countries face the problems of trade balance, although they are more inherent in developing countries and economies in transition. A majority of economists adhere to a common opinion that real depreciation may lead to an improvement of trade balance. That said, countries encountering trade balance issues use real exchange rate depreciation in order to improve trade balance. In fact, this research refers to the assessment of bilateral elasticity effect of real exchange rate depreciation and the income on export and import demand function of Serbia and its nine leading partners. 2004Q1-2015Q4 data and ARDL approach have been used in this research. The results obtained show the presence of the J-curve in cases of Germany, Austria and Croatia. On the other hand, we examined if the Marshall-Lerner condition was fulfilled in the case of bilateral trade with Austria. Finally, we found that the elasticity of income has a greater effect on the export and import demand function, in relation to the elasticity of the exchange rate.

Suggested Citation

  • Kurtovic Safet & Halili Blerim & Maxhuni Nehat, 2017. "Bilateral Trade Elasticity of Serbia and Her Trading Partners," Review of Economics, De Gruyter, vol. 68(3), pages 181-204, December.
    • Handle: RePEc:lus:reveco:v:68:y:2017:i:3:p:181-204:n:1
    DOI: 10.1515/roe-2017-0012
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    References listed on IDEAS

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    More about this item

    Keywords

    J-curve; Marshall-Lerner condition; exchange rate; income; trade balance;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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