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Determinants of Current Account in Cases of Serbia and Romania: Time-Varying Parameters Approach

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  • Bošnjak Mile

    (PhD, Assistant Professor, University of Zagreb, Faculty of Economics and Business)

Abstract

Following competing theories, the paper brings the determinants of the Serbian and Romanian current account dynamics with policy implications. The research sample consists of quarterly time series data over the period 2004q1–2017q2 and 2007q1-2017q4 for the cases of Serbian and the Romanian case, respectively. The estimates from the state space model with time-varying parameters (TVP) approach suggest that role of domestic demand is significant in both cases even though more prominent in case of Serbia. Marshall-Lerner conditions were fulfilled in case of Serbia while not in the Romanian case. The effects of money supply on the current account is found to be in line with the monetary approach in case of Romania while in the Serbian case the effect of an increase in the money supply is positive. Consequently, to resolve the issue of the current account deficit the research findings suggest the country-specific policy mix for each country.

Suggested Citation

  • Bošnjak Mile, 2019. "Determinants of Current Account in Cases of Serbia and Romania: Time-Varying Parameters Approach," South East European Journal of Economics and Business, Sciendo, vol. 14(1), pages 21-33, June.
    • Handle: RePEc:vrs:seejeb:v:14:y:2019:i:1:p:21-33:n:4
    DOI: 10.2478/jeb-2019-0004
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    References listed on IDEAS

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    Cited by:

    1. Mile Bošnjak & Vlatka Bilas & Domagoj Raèiæ, 2019. "Time-varying parameters of Croatian import demand," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 37(2), pages 853-872.

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    More about this item

    Keywords

    Serbia; Romania; current account; time-varying parameters;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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