A Sustainability Analysis of Serbia's Current Account Deficit

Is Serbia's permanent current account deficit sustainable in medium and long term? In the first part of the book author tries to answer this question analysing factors such as current account structure, the cause of the current account deficit,the structure and volume of foreign capital inflow, the level of economic growth,real exchange rate appreciation, the structure and level of external debt, the level of foreign reserves,financial system stability,openness of the economy, political and macroeconomic stability and global factors.In the second part of the book the theoretical model created by Milesi-Ferretti and Razin is used to access Serbia’s medium-term current account sustainability. On the basis of Reisen’s theoretical work (Reisen methodology) and by adding net reinvested earnings from foreign direct investment to the model, a new (modified) model for assessing the long-term sustainability of a country’s current account deficit is presented. The created model was used for assessing the long-term sustainability of Serbia’s current account deficit.