Economic Themes (2012) 50 (3) 8, 391-414


enad Janković, Nenad Stanišić

Abstract: Choosing an exchange rate regime is an important issue of economic policy in transition countries, considering the initial macroeconomic situation, the speed and scope of changes in internal structure of domestic economy, rapid integration in the regional and world economy, as well as turbulent global economic environment. In such circumstances, the exchange rate policy is expected to contribute to resolving the often conflicting objectives which can not be simultaneously achieved. This is also the case with dinar exchange rate in the period of transition of the Serbian economy after 2000, when the exchange rate was supposed to contribute to establishing and maintaining the macroeconomic stability and reducing the foreign trade imbalance. Exchange rate regime applied in Serbia during this period changed several times, whereas the set goals have never been completely achieved. Efficiency of the current policy of inflation targeting with a managed floating exchange rate has been significantly reduced due to high unofficial euroization of the Serbian economy and great impact of exchange rate changes on prices. Based on the analysis performed in the paper, we come to the conclusion that the key issue of economic policy in Serbia is not changing the exchange rate regime, but increasing the efficiency of monetary policy, as well as its compliance with fiscal policy.

Keywords:  exchange rate; dinarization; exchange rate channel; inflation targeting; Serbia

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