Economic Themes (2025) 63 (3) 4, 313-328
Aleksandar Sekulić, Emilija Beker Pucar, Stefan Stojkov
Abstract: The trade balance (TBD) of the Republic of Serbia has consistently recorded a deficit, as the value of imports exceeds the value of exports. A significant contributing factor behind the deepening of this deficit is the high dependence on energy imports, coupled with the longstanding issue of impaired competitiveness. In this regard, the aim of this paper is to analyze the impact of changes in energy prices, expressed through the Energy Price Index (EPI), as well as the Real Effective Exchange Rate (REER), as an indicator of competitiveness, on the Serbian chronic TBD. The empirical analysis is based on a Vector AutoRegressive (VAR) model, which includes the variables TBD, EPI and REER, in order to examine their dynamic relationship during the period 2009M1-2023M12. The results of Impulse Response Functions (IRF) confirm that REER appreciation and the EPI rise contribute to the deepening of the TBD. Chronic TBD in Serbia has been negatively affected by the appreciation of the RER, which is particularly pronounced in the current phase of dinar exchange rate stabilization, as well as by oil price shocks. With this in mind, economic policymakers should focus on preventing currency overvaluation within the domain of monetary policy and implementing fundamental structural reforms aimed at sustainable exports and reduced import dependence, particularly in terms of energy dependence, to stabilize the external position.
Keywords: trade balance deficit; energy prices; real exchange rate; Republic of Serbia; VAR model.
THE ROLE OF ENERGY PRICES AND THE REAL EXCHANGE RATE IN SHAPING THE TRADE BALANCE DEFICIT: EVIDENCE FROM SERBIA
Aleksandar Sekulić, Emilija Beker Pucar, Stefan Stojkov
Abstract: The trade balance (TBD) of the Republic of Serbia has consistently recorded a deficit, as the value of imports exceeds the value of exports. A significant contributing factor behind the deepening of this deficit is the high dependence on energy imports, coupled with the longstanding issue of impaired competitiveness. In this regard, the aim of this paper is to analyze the impact of changes in energy prices, expressed through the Energy Price Index (EPI), as well as the Real Effective Exchange Rate (REER), as an indicator of competitiveness, on the Serbian chronic TBD. The empirical analysis is based on a Vector AutoRegressive (VAR) model, which includes the variables TBD, EPI and REER, in order to examine their dynamic relationship during the period 2009M1-2023M12. The results of Impulse Response Functions (IRF) confirm that REER appreciation and the EPI rise contribute to the deepening of the TBD. Chronic TBD in Serbia has been negatively affected by the appreciation of the RER, which is particularly pronounced in the current phase of dinar exchange rate stabilization, as well as by oil price shocks. With this in mind, economic policymakers should focus on preventing currency overvaluation within the domain of monetary policy and implementing fundamental structural reforms aimed at sustainable exports and reduced import dependence, particularly in terms of energy dependence, to stabilize the external position.
Keywords: trade balance deficit; energy prices; real exchange rate; Republic of Serbia; VAR model.
