Abstract
This paper aims to investigate and determine the relationship between the budget, changes in GDP, price indices, and movement of the real exchange rate on one hand, and the state of the mud balance in Bosnia and Herzegovina during the period of 2005-2019. The paper covers literature related to this field, empirical knowledge, case studies of various international types of research, and certain econometric methods. The research results indicate the presence of a negative correlation between the budget deficit, reduction in prices and the real exchange rate, and improvement of the current balance. The outcomes vary depending on whether it is in the short-term or long-term horizon.
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