This paper investigates the short to medium-term empirical relationships between the current account balances and a broad set of macroeconomic determinants in Serbia and selected CEE countries. Using novel model averaging techniques we focus the analysis to individual country’s data only. The results suggest that the model tracks the current account movements over the past decade quite well and captures its relative volatility. Signs and magnitudes of different coefficients indicate significant heterogeneity among countries providing empirical support for the country-level analysis

The level of competitiveness in Serbian banking industry is tested using the Panzar-Rosse model on bank level data in period from

The authors thank the Editor and two anonymous referees for very useful suggestions and comments. The paper reflects the views of the authors and not the institutions to which they are affiliated.

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This paper studies the impact of fiscal policy and external shocks on the sustainability of Serbia?s external position. The key determinants of Serbia's current account balance are identified using model averaging techniques and are compared with estimates obtained for other small open economies (Poland, Georgia, Morocco, Ukraine, and Estonia). The paper uses estimated influences of macrovariables on the current account balance to generate a rich set of possible outcomes for the external position of the country. The results suggest the importance of fiscal policy for the reduction of external imbalances in all countries in our sample. In particular, credible and sustained fiscal adjustment can reduce current account deficit and stabilize Serbia?s external position close to its current level over the medium term. The analysis also warns that lack of success in fiscal consolidation coupled with external shocks may easily push the external position onto an unsustainable path.