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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Hsing, Yu & Hsieh, Wen-jen, 2010. "Responses of Real Output in Serbia to the Financial and Global Economic Conditions," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 107-114, September.
    • Handle: RePEc:rjr:romjef:v::y:2010:i:3:p:107-114
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    References listed on IDEAS

    as
    1. John B. Taylor, 1999. "A Historical Analysis of Monetary Policy Rules," NBER Chapters, in: Monetary Policy Rules, pages 319-348, National Bureau of Economic Research, Inc.
    2. repec:hal:journl:halshs-00404729_v1 is not listed on IDEAS
    3. 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.
    4. 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," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(2), pages 199-226.
    5. 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.
    6. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1.
    7. David H. Romer, 2000. "Keynesian Macroeconomics without the LM Curve," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 149-169, Spring.
    8. 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," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(2), pages 199-226, June.
    9. Giorgio Dominese, 2006. "How To Prepare the EU Integration: Banking System, Monetary Policy, and Exchange Rate in Macedonia," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 13(2), pages 378-392, July.
    10. Rostowski, Jacek, 1998. "Macroeconomic Instability in Post-Communist Countries," OUP Catalogue, Oxford University Press, number 9780198290483.
    11. 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.
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    Citations

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    Cited by:

    1. Nedeljković, Milan & Urošević, Branko, 2012. "Determinants of the Dinar-Euro Nominal Exchange Rate," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 121-141, September.
    2. Milan Nedeljkovic & Branko Urosevic, 2011. "Determinants of the Dinar-Euro Nominal Exchange Rate," Working papers 18, National Bank of Serbia.
    3. Milan Nedeljkovic & Branko Urosevic, 2011. "Determinants of the Dinar-Euro Nominal Exchange Rate," Working papers 18, National Bank of Serbia.

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    More about this item

    Keywords

    monetary policy function; uncovered interest parity; exchange rate; world interest rate; inflation rate; government deficit;
    All these keywords.

    JEL classification:

    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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