LAUSR

ABSTRACT This research analyses the monetary, financial, and trade channels influencing the dinar exchange rate during the de jure managed floating regime in Serbia. The ARDL (1 0 0 3 0 0 0) ECM is estimated for the period 2009Q1-2024Q1, focusing on Soft Managed Floating (SMF) and the Hard Managed Floating (HMF) episodes. Results suggest that exchange rate stabilisation during the HMF episode induces appreciation pressures. Conversely, higher consumer prices (CPI), a decline in foreign exchange reserves (FXR), foreign direct investments (FDI) outflows, and improvements in the merchandise trade balance (MTB) in the long run, along with lower interest rate (IR) in the short run, contribute to depreciation pressures. Monetary and financial variables dominate over the trade channel, as portfolio investments in the short run and FDI and FXR in the long run prevent depreciation despite a chronic MTB deficit and relatively higher inflation.