Should the Macedonian denar be devalued? Some evidence from the trade equations

Branimir Jovanovic
2009 SEER. Journal for Labour and Social Affairs in Eastern Europe. Journal of the European Trade Union Institute  
Recently some have reminded us of the panacea for the Macedonian economythe devaluation of the denar. We feel that the public deserves an explanation -why might devaluation help the economy and why we believe it would not help the Macedonian economy at the present moment. In theory, devaluation makes domestic products cheaper and foreign products more expensive, so it could stimulate exports and de-stimulate imports, improving the current account. In practice, however, Macedonian exports appear
more » ... nian exports appear not to be dependent on the exchange rate, while imports appear to depend only very little. Thus, devaluing the denar is likely to have no major effect on the current account while the costs, in terms of the loss of confidence in the national currency, will be very high.
doi:10.5771/1435-2869-2009-3-339 fatcat:zwyreyhutfbwdjutxj6lpsdgj4