Front Matter

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© 2006 International Monetary Fund

October 2006

IMF Country Report No. 06/382

This Selected Issues paper for the Republic of Serbia was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on August 16, 2006. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the government of the Republic of Serbia or the Executive Board of the IMF.

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Selected Issues

Prepared by Tokhir Mirzoev, Eric Mottu, Andreas Westphal (all EUR); Peter Hayward (MFD Consultant), Anna Ivanova (FAD), Haimanot Teferra (AFR) and Janko Guzijan (Resident Representative Office)

Approved by the European Department

August 16, 2006


  • I. Overview and Summary

  • II. Gross Domestic Capital Formation and External Deficits

    • A. Main Findings

    • B. Domestic Investment and External Deficits in Transition

    • C. Investment, Income per Capita, and Compositional Factors

    • D. Current Account Deficits and External Debt Developments

  • Figures

  • 1a. Selected CEEC and SEE Countries: Gross Investment, Current Account Deficit and External Debt, 1995–2005

  • 1b. Selected CEEC and SEE Countries: Gross Investment, Current Account Deficit and External Debt, 1995–2005

  • 2. Selected CEEC and SEE Countries: Current Account Deficit, FDI Inflows and External Debt, 1995–2005

  • III. Employment

    • A. Background

    • B. Options

  • Text Tables

  • 1. Employment by Ownership, 2001–06

  • 2. Labor Market Developments, Labor Force Survey Data

  • 3. Components of Unit Labor Cost in Manufacturing

  • 4. Profit and Losses of Enterprises, 2004–05

  • References

  • Tables

  • 1. Employment by Ownership, 2001–06

  • 2. Changes to the Personal Income Tax and Social Security Contributions

  • IV. The Banking System

    • A. Introduction

    • B. Development Subsequent to the FSAP

    • C. Remaining Steps

    • D. Competition

    • E. The Challenges Ahead

  • V. Economic Structure and Choice of Exchange Rate Regime

    • A. Introduction

    • B. Structural Factors

    • C. Serbia’s Structural Characteristics in International Context

    • D. Discussion

  • Tables

  • 1. Quantitative Assessment of the Choice of the Exchange Rate Regime

  • 2. Ranking of Arguments

  • 3. Exchange Rate Regime Considerations, 2005

  • References

  • VI. Foreign Exchange and Monetary Operations

    • A. Introduction

    • B. Foreign Exchange Intervention

    • C. Repo Operations

    • D. Interest Rate Corridor

    • E. Transmission From the Repo Rate to the Exchange Rate

  • Figures

  • 1. Repo Rates and Belibor

  • 2. Beonia, Belibor, Repo Rates, and NBS Lending and Deposit Facilities

  • VII. Inflation

    • A. Exchange Rate Pass-Through to Core Inflation

    • B. Inflation Targeting: Emerging Market Experience

  • Text Tables

  • 1. Core Price Index and Exchange Rate, Number of Cointegrating Relations

  • 2. Exchange Rate Pass-Through Estimates

  • 3. Inflation Prior to the Transition to Full-Fledged Inflation Targeting

  • 4. Transition to Inflation Targeting

  • Text Figures

  • 1. Nominal Exchange Rate and Retail Prices Twelve-month growth

  • 2. Daily Exchange Rate Dinar/Euro, Feb 01, 2005 – July 21, 2006

  • 3. Exchange Rate and Core Price Index

  • References

  • Appendix Table A.1: Composition of the Non-Core Price Index, 2006