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

Yu Hsing and Wen-jen Hsieh
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Yu Hsing: College of Business, Southeastern Louisiana University, Hammond, LA 70402, USA.
Wen-jen Hsieh: Department of Economics, College of Social Sciences, National Cheng Kung University, No.1, University Road, Tainan City, Taiwan

Journal for Economic Forecasting, 2010, issue 3, 107-114

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.

Keywords: monetary policy function; uncovered interest parity; exchange rate; world interest rate; inflation rate; government deficit (search for similar items in EconPapers)
JEL-codes: E52 F41 O52 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2010:i:3:p:107-114

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