Аннотация:For years now, Serbia de facto lives in a dual currency system. Local currency is being used for most of the transactions with relatively small amounts. Alongside with that, local currency is being used as a formal means of payment for transaction accounted in Euros, i.e. with FX clause. FX clause is being used to express prices in real sector (goods, services, real estate, salaries, rents), but also for lending and repayment purposes in financial sector. FX clause, from theoretical perspective, would make sense as means of controlling the risk of FX rate movement in future, but only for agents with FX inputs, i.e. expenditures. However, mainly due to high inflation and hyperinflation heritage, FX clause is being used often and basically wrong, as an instrument to control risk of loss of purchasing power due to inflation. For this purpose it would be appropriate to use indexing for changes in Consumer Price Index, as a measure of inflation, and not indexing for changes in FX rate, i.e. FX clause. This because inflation and movement in FX rate do not have to be, and in most cases are not, perfectly correlated. Despite this, FX clause is widespread in use in both real and financial sectors. This paper is analyzing negative economic and financial consequences of widespread FX clause usage for an overall economic system of a country.
