<abstract xmlns="http://www.w3.org/1999/xhtml"><p>Constant current account deficit in Bosnia and Herzegovina results from a large foreign trade imbalance, which in turn is a consequence of uncompetitiveness of the economy in the global market. The current account deficit is mainly financed by foreign remittances, foreign aid, and least of all by foreign investment. Lately, the outflow of the active, working population has been decreasing the labor force (especially the qualified and highly educated employees), as well as the domestic demand, which will exert further pressure on the balance of payments account. On the other hand, monetary policy is operating under the principles of currency board, i.e. applying a firm exchange rate, so the question arises whether and to what extent it is sustainable, under the conditions of a high current account deficit. The purpose of this paper is precisely to examine the relation between the deficit of balance of payments and the sustainability of the currency board arrangement in Bosnia and Herzegovina, under such conditions.</p></abstract>

Constant current account deficit in Bosnia and Herzegovina results from a large foreign trade imbalance, which in turn is a consequence of uncompetitiveness of the economy in the global market. The current account deficit is mainly financed by foreign remittances, foreign aid, and least of all by foreign investment. Lately, the outflow of the active, working population has been decreasing the labor force (especially the qualified and highly educated employees), as well as the domestic demand, which will exert further pressure on the balance of payments account. On the other hand, monetary policy is operating under the principles of currency board, i.e. applying a firm exchange rate, so the question arises whether and to what extent it is sustainable, under the conditions of a high current account deficit. The purpose of this paper is precisely to examine the relation between the deficit of balance of payments and the sustainability of the currency board arrangement in Bosnia and Herzegovina, under such conditions.

Balance of Payments Deficit and Currency Board Arrangement Sustainability in Bosnia and Herzegovina

Zagreb International Review of Economics and Business

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Constant current account deficit in Bosnia and Herzegovina results from a large foreign trade imbalance, which in turn is a consequence of uncompetitiveness of...

Balance of Payments Deficit and Currency Board Arrangement Sustainability in Bosnia and Herzegovina

Publicado en línea: 29 ene 2021

Páginas: 43 - 56

DOI: https://doi.org/10.2478/zireb-2020-0022

Palabras clave
current account, currency board, balance of payments deficit

© 2020 Siniša Kurteš et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Balance of Payments Deficit and Currency Board Arrangement Sustainability in Bosnia and Herzegovina

Publicado en línea: 29 ene 2021

Páginas: 43 - 56

DOI: https://doi.org/10.2478/zireb-2020-0022

Palabras clavecurrent account, currency board, balance of payments deficit

© 2020 Siniša Kurteš et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Palabras clave
current account, currency board, balance of payments deficit