EFFECTS OF FOREIGN CURRENCY EXCHANE RATES ON COMPETITIVENESS OF THE REPUBLIC OF SERBIA IN INTERNATIONAL BUSINESS

Abstract

In the era of globalization and international flows that carry the liberalization,deregulation and increased impact of international monetary institutions, as well asthe general macroeconomic environment and economic policies of the nationaleconomy have been crucial to the economic competitiveness in the internationalmarket. Exchange rate policy, as one of the factors of economic policy, has significantimplications for competitiveness, balance of payments and indebtedness. In thisregard, the purpose of this paper is to point out the exchange rate regime of theRepublic of Serbia, which has, by appreciation of currency reduced thecompetitiveness of domestic product, balance of payments deficit and a high level ofindebtedness. The work methodology is based on the processing of secondary datapublished in public sources for the period 2001-2012 of the Republic of Serbia inorder to obtain a representation of the analyzed data. The research results indicate thatthe real exchange rate of the dinar is almost double the official rate, and there is noparticular interest in exporting local products. Therefore, the monetary and foreignexchange as well as the overall economic policy appears as a catalyst for thedevelopment of Serbia's competitiveness in the international market, and it can beconcluded that the monetary-and-foreign exchange policy has not achieved economicobjectives although the stability of the exchange rate as a positive measure isconstantly emphasized by economic policy makers. The alleged stability cost Serbia alot, as evidenced by data from the balance of payments: a high deficit, high externaldebt and consequential debt slavery of Serbia.