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THE KEY MACROECONOMIC DETERMINANTS OF GDP GROWTH: THE CASE OF THE DOLLARIZED ECONOMY IN MONTENEGRO
Jovan Djuraskovic, Milena Radonjic, Milivoje Radovic, Andrija Djurovic, Milorad Jovovic

ABSTRACT. The aim of this paper is to determine the most significant macroeconomic variables that influence the creation of GDP in the dollarized economy of Montenegro, i.e. to determine to what extent variations in GDP can be explained by key macroeconomic factors. Montenegro is a country that unilaterally decided to use the Euro as its currency forfeiting its monetary authority and that fact represents a natural experiment for empirical studies of this kind. Although there is extensive literature on factors influencing the creation of GDP, no studies have been carried out so far on the example of Montenegro. The methodology used in this analysis is based on a model averaging technique, which, according to available literature, has not been used in the study of this topic so far. The results of the study have shown that the GDP value from the previous period can best explain the movement of GDP, which confirms the theoretical assumption that GDP is an autoregressive process. In addition, current account deficit, foreign direct investment, unemployment rate and average salary are statistically significant variables that affect the movement of GDP with a certain lag .

KEYWORDS:  GDP, economic growth, macroeconomic determinants, model averaging technique.

JEL classification:  E01, E20, C50.