EQUILIBRIUM REAL EXCHANGE RATE ASSESSMENT OF THE SERBIAN DINAR: THE MB APPROACH

This paper attempts to empirically estimate the equilibrium exchange rate level of the Serbian dinar. For that purpose, the macroeconomic balance approach (MB) is used, developed by the IMF's Consultative Group on Exchange Rate Issues (CGER). The research was made by using panel data series. The testing of regression parameters variability was performed with the F test. The normal distribution assumptions were met. Current account norm was evaluated based on estimated coefficients in the model and projected values of the independent variables, and further, based on import and export elasticities, the level of exchange rate which returns current account into its equilibrium point was calculated. The results showed the dinar's overvaluation over medium term, under unchanged economic policy.