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Determinants of Currency Substitution in Southeast European Countries

Author

Listed:
  • Pepić Marina

    (National bank of Serbia, Belgrade, Serbia)

  • Marinković Srđan

    (Faculty of Economics, University of Niš, Serbia)

  • Radović Ognjen

    (Faculty of Economics, University of Niš, Serbia)

  • Malović Marko

    (Institute of Economic Sciences, Belgrade, Serbia)

Abstract

Currency substitution is widespread in less developed countries. Since it increases financial vulnerability and limits the effectiveness of monetary policy, it is often in the focus of scientists and experts. In this paper, we analyze the importance of euroization determinants in Serbia and neighboring countries - Albania, Bosnia and Herzegovina, FYR Macedonia, Romania and Croatia for the period 2003-2014. We examine the impact of domestic inflation, nominal exchange rate of the domestic currency against the euro, interest rate spread on domestic and foreign currency, foreign currency inflow in the form of foreign direct investments and exports, as well as the euroization of banks’financial resources on the degree of loan euroization. The results obtained by multiple regression panel methods confirm the statistical significance and assumed direction of the influence of all analyzed variables except inflation and current account balance.

Suggested Citation

  • Pepić Marina & Marinković Srđan & Radović Ognjen & Malović Marko, 2015. "Determinants of Currency Substitution in Southeast European Countries," Economic Themes, Sciendo, vol. 53(2), pages 162-184, June.
    • Handle: RePEc:vrs:ecothe:v:53:y:2015:i:2:p:162-184:n:2
    DOI: 10.1515/ethemes-2015-0010
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    References listed on IDEAS

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    Cited by:

    1. Marinakis, Yorgos D. & White, Reilly & Walsh, Steven T., 2020. "Lotka–Volterra signals in ASEAN currency exchange rates," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 545(C).

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