The effects of exchange rate on balance trade and on monetary aggregates of macedonia and the impact of the current world crisis in its economy

Mr.Sc. Kadishe Limani, Mr.Sc. Jeta Hani


Macedonia is a country that is close related to the European Union countries where the majority of the Macedonian foreign trade is with the European Union countries (52%). So the Macedonian economy is in a high level dependency of Euro.  Since Denar is connected closely to Euro, and the level of its usage in everyday economic activity is close to the usage of Denar, it is obvious to be discussed as a dilemma whether Macedonia should have Euro as its currency. However, the problem lies in that whether it is the right time for such action as the best solution for Macedonian economy, keeping in mind the fact that in the international arena there is present a second crisis that is the crisis of Euro-Zone.

Based on various sources and on our econometric results, in this paper is argued and supported the main hypothesis that the fix exchange rate for Macedonia is a more optimal choice in comparison with the unilateral euroisation and flexible exchange rate. Thus, during the research we found out some arguments that support the existing regime, such as: under a flexible regime an eventual devaluation of the Denar is more possible, which can lead to more negative effects on the economy than benefits. Thus, devaluation of the Denar will have no significant effects on the balance trade (export and imports) and GDP. This means that the competitiveness of a country relies on the other factors. In addition an eventual devaluation of the Denar, it will not have significant effects on monetary aggregates (M2 and M4) due to the asset substitution from Denar deposits to foreign deposits and vice-versa.


Financial Crisis; Public Debt; Monetary Aggregates; Balance Trade; Exchange Rate and Eurozone;


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DOI: 10.21113/iir.v2i2.153

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