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Responses of Real Output in Serbia to the Financial and Global Economic Conditions

  • Hsing, Yu


    (College of Business, Southeastern Louisiana University, Hammond, LA 70402, USA.)

  • Hsieh, Wen-jen

    (Department of Economics, College of Social Sciences, National Cheng Kung University, No.1, University Road, Tainan City, Taiwan)

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    Applying and extending Taylor (1993, 1999) and Romer (2000, 2006), this paper examines output fluctuations for Serbia based on a simultaneous equation model consisting of the open-economy IS function, the monetary policy function, and uncovered interest parity. The GARCH(1,0) model is employed because the residual variance is affected by the past variance. Real GDP is positively affected by the real stock price and real government deficit and negatively influenced by expected real depreciation of the dinar, the world real interest rate, and the inflation rate. There are significant seasonal effects. Therefore, a healthy stock market, a stronger dinar, a lower world real interest rate, a lower inflation rate, and an active fiscal policy will play important roles in the recovery of the Serbian economy.

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    Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

    Volume (Year): (2010)
    Issue (Month): 3 (September)
    Pages: 107-114

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    Handle: RePEc:rjr:romjef:v::y:2010:i:3:p:107-114
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    1. David H. Romer, 2000. "Keynesian Macroeconomics without the LM Curve," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 149-169, Spring.
    2. Nikola Fabris, 2006. "Inflation Targeting With Special Review on Appliction in Serbia," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 53(4), pages 389-405, December.
    3. Kosta Josifidis & Jean-Pierre Allegret & Emilija Beker Pucar, 2009. "Monetary and Exchange Rate Regimes Changes: The Cases of Poland, Czech Republic, Slovakia and Republic of Serbia," Post-Print halshs-00404729, HAL.
    4. Yu Hsing, 2005. "Impacts of macroeconomic policies on the Latvian output and policy implications," Applied Economics Letters, Taylor & Francis Journals, vol. 12(8), pages 467-471.
    5. Giorgio Dominese, 2006. "How To Prepare the EU Integration: Banking System, Monetary Policy, and Exchange Rate in Macedonia," Transition Studies Review, Springer, vol. 13(2), pages 378-392, 07.
    6. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
    7. Rostowski, Jacek, 1998. "Macroeconomic Instability in Post-Communist Countries," OUP Catalogue, Oxford University Press, number 9780198290483.
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