Limited Possibilities of Adapting the Economy of Bosnia and Herzegovina to the External Pressures of the Economic Crisis

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Limited Possibilities of Adapting the Economy of Bosnia and Herzegovina to the External Pressures of the Economic Crisis

Journal Title: Acta Economica - Year 2012, Vol 10, Issue 17

Abstract

The economic condition in Bosnia and Herzegovina (BiH) is dependent on the continuous inﬂow of money from foreign countries. Under the impact of the economic crisis, there is a reduction in foreign donations, remittances from abroad, foreign investments and exports are made more difficult, which threatens its economic and social stability. In this paper, we investigate the inﬂuence of external disturbances on the balance of payments of BiH, as well as possibilities of conducting an economic policy which equalizes the real eﬀective and balancing foreign exchange rates. The analysis shows that BiH is open up for an external pressure on the balance of payments since the Central Bank of BiH conducts neither an exchange rate policy nor a foreign exchange reserves policy, and the crisis of the exchange rate and the crisis of the foreign exchange reserves take turns in BiH. In order to reduce the negative eﬀects of the deviation of the real eﬀective and balancing foreign exchange rates, in BiH it is necessary that prices and salaries be ﬂexible and that structural reforms which would increase the competitiveness of domestic enterprises in the foreign market be implemented.

Authors and Affiliations

Rajko Tomaš

Keywords

EP ID EP43745
DOI https://doi.org/10.7251/ACE1217009T
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