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- Title
POTROŠNJA I REALNI DEVIZNI KURS: POSTOJI LI BAKUS-SMIT ZAGONETKA NA RELACIJI SRBIJA-EMU?
- Authors
PETROVH, PREDRAG
- Abstract
In this paper, we present the results of a study conducted in order to determine whether between Serbia and the EMU figuring the Backus-Smith puzzle. The first part of the analysis includes empirical testing of the relationship between the consumption growth differential and the real exchange rate, in order to examine whether this relationship is a positive one as it suggests a complete risk sharing theory with non-trade goods. Analysis of the impact of the real exchange rate was deepened by its decomposition to nominal exchange rate and inflation differential. In the second part of the research, we focus on the case of incomplete risk sharing, with the intention to check whether in this way can be explained eventual presence of the Backus - Smith puzzle. We have conducted empirical research using the concept of cointegration (Johansen and the Engle-Granger tests) and the classical regression analysis of time series, with certain corrections of consequences arising from the violation of the basic standard linear regression model assumptions. Of the five different techniques that we used four led to negative coefficient estimates for the real and nominal exchange rate, while the coefficient for the inflation differential is negative in only two cases. Based on these findings, we conclude that the Backus-Smith puzzle is present between Serbia and the EMU and its basic cause is the dynamics of the nominal exchange rate.
- Subjects
SERBIA; FOREIGN exchange rates; CONSUMPTION (Economics); NONTRADED goods; PRICE inflation; RISK sharing; ECONOMIC &; Monetary Union
- Publication
Megatrend Review / Megatrend Revija, 2013, Vol 10, Issue 2, p135
- ISSN
1820-3159
- Publication type
Article