Stylized Facts

about former Yugoslav republics economies

Exchange rates Financial assets

Monthly effective exchange rates time series plots in four states of the former Yugoslavia

In this blog post graphic methods are used to describe monthly effective exchange rate time series in the former Yugoslav republics, now four independent states.

Two types of a line graph could be used to show changes in effective exchange rates over time. The first displays effective exchange rates for four countries on a single graph. Because these time series are overlapping it could be quite difficult to spot some patters. The second type of graph displays each series on a separate panel. On such graph any persistent pattern related to trend or seasonal factors should be visible.

Figure 1 shows line graphs of monthly nominal effective exchange rate for four countries on the same panel.

Figure 1. Nominal effective exchange rates in four countries (same panel)

Line graphs in Figure 1 show that the nominal effective exchange series for Croatia, Macedonia and Slovenia are fluctuating around 100% with tendency to increase since 2012, but only up to 110%. Serbian nominal effective exchange series has a negative trend by dropping from 150+% at the beginning of period to 85% in 2019. This series is also the most volatile among four nominal effective exchange series. These features of the nominal effective exchange rate series are even more obvious from the line graphs in Figure 3.

Figure 2 shows line graphs of monthly real effective exchange rate for four countries on the same panel.

Figure 2. Real effective exchange rates in four countries (same panel)

The similar patters could be observed for the real effective exchange rates series: fluctuation around 100% in case of Croatia, Macedonia and Slovenia, and great volatility of the Serbian series with the values of the real effective exchange rates most of the time well above 100% since 2007. It is well-known that the values above 100% mean the appreciation and those below 100% the depreciation of the currency.

Figure 3 shows line graphs of nominal and real effective exchange rates for four countries, but this time on a separate panels.

Figure 3. Effective exchange rates in four countries (separate panels)

Now it is even more obvious that the Serbian nominal effective exchange rates series is moving in opposite direction to other three nominal effective exchange rates series. In case of real effective exchange rates series we can add the following to what we said before. Most of the time real effective exchange rates series in case of Croatia and Slovenia are below 100% (means depreciation). The same could be said for Macedonia particularly after 2010. However, in case of Serbian real effective exchange rates series with a few exceptional months (during 2010, 2012 and 2017) was well above 100% (means appreciation of dinar). If we compare values on the vertical axis we can see that the Serbian real effective exchange rates is most volatile series, while the least volatile is Slovenian real effective exchange rates series.

Figure 4 shows nominal and real effective exchange rates series for each country on a separate panels.

Figure 4. Effective exchange rates in four countries (separate panels)

Again, the Serbian effective exchange rates series show different patterns than series for three other countries. Since about 2012 the real effective exchange rates series is above the nominal effective exchange rates series in Croatia and Slovenia and to some extent in Macedonia. However, this is not the case in Serbia. Here we have quite an opposite pattern, i.e. the values of real effective exchange rates is well below the values of nominal effective exchange rates.

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Zlatko Kovacic
Director of Wellington based My Statistical Consultant Ltd company. Retired Associate Professor in Statistics. Has a PhD in Statistics and over 35 years experience as a university professor, international researcher and government consultant.