Determinants of Public Debt and Fiscal Sustainability

The subject of this doctoral dissertation is an analysis of determinants of the public debt accumulation and assessment of fiscal sustainability in Serbia and selected peer countries. The main goal is empirical quantification of the relations between public debt dynamics and its determinants and subsequent assessment of fiscal sustainability conditions. The methodology of empirical research is based on three macroeconomic concepts: debt accumulation identity, intertemporal budget constraint and fiscal reaction function. The focus of empirical research is on econometric modeling of public debt dynamics with respect to fiscal and non-fiscal determinants and forward-looking simulations of the public indebtedness indicators. The central part of the empirical research methodology is divided into four building blocks. The first methodological block is an exercise of debt accumulation decomposition to individual contributions of its determinants. The second block is a panel regression analysis that quantifies the impact of debt determinants (primary balance, real growth, inflation, real exchange rate, and interest rate) on the dynamics of actual and structural public indebtedness. The third block is a panel estimation of the reaction of fiscal policy stance to the debt accumulated in the past and cyclicality of economic output. Application of scenario analysis and stress testing to forward-looking simulations of the debt dynamics as a forth block completes research methodology. The results of empirical research imply that all four hypotheses are proved. Results from the regression modeling of public indebtedness confirm the dynamics of the debt covariates with non-fiscal and fiscal variables. Descriptive analysis of debt decomposition and econometric modeling of indebtedness impose that debt-deficit adjustments and cyclically-adjusted primary balance as the fiscal variables are the most important contributors to public debt dynamics. Estimated results from the empirical modeling of the fiscal reaction function reveal that in the post-crisis period, the fiscal stance of the Emerging European Countries (EEC) positively responded to accumulated debt, confirming third hypothesis. Scenario analysis and Monte Carlo debt simulations indicate that accumulation of public debt would be profoundly accelerated if EEC countries did not interrupt practicing pro-cyclical fiscal policy behavior after the global crisis outbreak in support of fourth hypothesis validity

Uticaj reformskih mera fiskalne politike na makroekonomske performanse Srbije

Krajem 2014. godine Vlada Republike Srbije je usvojila budžet u okviru šireg paketa strukturnih reformi, koji uključuje i reformu javne uprave, javnih preduzeća, kao i preduzeća u restrukturiranju. Ovaj budžet se može okarakterisati po mnogim parametrima kao «reformski», prevashodno jer je predviđeno značajno smanjenje budžetskih rashoda, zbog čega je dobio i načelnu podršku IMF, kao i Fiskalnog saveta. S druge strane, rezanje državnih rashoda će, pored fiskalnih, neminovno imati uticaj i na druge makroekonomske performanse Republike Srbije značajne za privredni ambijent. U ovom radu će biti analiziran uticaj mera fiskalne politike na kretanje odabranih fiskalnih, monetarnih i realnih varijabli u srednjem roku

Determinante javnog duga i fiskalne održivosti

The subject of this doctoral dissertation is an analysis of determinants of the public debt accumulation and assessment of fiscal sustainability in Serbia and selected peer countries. The main goal is empirical quantification of the relations between public debt dynamics and its determinants and subsequent assessment of fiscal sustainability conditions. The methodology of empirical research is based on three macroeconomic concepts: debt accumulation identity, intertemporal budget constraint and fiscal reaction function. The focus of empirical research is on econometric modeling of public debt dynamics with respect to fiscal and non-fiscal determinants and forward-looking simulations of the public indebtedness indicators. The central part of the empirical research methodology is divided into four building blocks. The first methodological block is an exercise of debt accumulation decomposition to individual contributions of its determinants. The second block is a panel regression analysis that quantifies the impact of debt determinants (primary balance, real growth, inflation, real exchange rate, and interest rate) on the dynamics of actual and structural public indebtedness. The third block is a panel estimation of the reaction of fiscal policy stance to the debt accumulated in the past and cyclicality of economic output. Application of scenario analysis and stress testing to forward-looking simulations of the debt dynamics as a forth block completes research methodology. The results of empirical research imply that all four hypotheses are proved. Results from the regression modeling of public indebtedness confirm the dynamics of the debt covariates with non-fiscal and fiscal variables. Descriptive analysis of debt decomposition and econometric modeling of indebtedness impose that debt-deficit adjustments and cyclically-adjusted primary balance as the fiscal variables are the most important contributors to public debt dynamics. Estimated results from the empirical modeling of the fiscal reaction function reveal that in the post-crisis period, the fiscal stance of the Emerging European Countries (EEC) positively responded to accumulated debt, confirming third hypothesis. Scenario analysis and Monte Carlo debt simulations indicate that accumulation of public debt would be profoundly accelerated if EEC countries did not interrupt practicing pro-cyclical fiscal policy behavior after the global crisis outbreak in support of fourth hypothesis validity

The inflation and exchange rate in the five Balkan countries from Maastricht convergence criteria prospect

In the focus of this research of the inflation and exchange rate from the Maastricht convergence criteria prospect are five Balkan countries, former Yugoslav republics: Bosnia and Herzegovina, Croatia, Macedonia, Montenegro and Serbia. Comparative analysis of the price and exchange rate stability in these countries was done by comparing to the EU average and certain Member States from Central, Eastern and Southeastern Europe (CESE). The basic goal was to determine the degree of nominal convergence, disregarding the fact that Maastricht convergence criteria are not the conditions for getting the status of the EU Member State, but for joining Economic and Monetary Union (EMU), or Euro zone. The subjects of the research were also the determinants of the price and exchange rate stability in this group of countries, and especially monetary policy strategy. Corresponding recommendations were given at the end to the analyzed countries and European Central Bank (ECB)

Integration of Western Balkan countries into the European system of digital data archives in social sciences: the case of Serbia

Science has a very important role in the development of any society. A special dimension of social phenomena has been analyzed by social sciences like anthropology, economics, education, communication studies, sociology etc. Despite that this type of research should provide solid basis for solving many social problems, the researchers in this area in the Western Balkans are facing many problems. The main limitation is the lack of funding for quality research, and the consequences are reflected in the small number of scientific papers published in internationally recognized journals and studies without connection to real problems. Regarding the fact that process of collecting primary data is most expensive and time consuming phase in the research process, establishment of national digital data archives for research data in social sciences and their integration into the standardized system for data sharing on the international level is considered as cost savings solution. Digital data archive (DDA) is technique that would deal with issues of preservation and archiving primary research data. In this paper we analyze the concept of DDA and its significance for researchers in social sciences, give an overview of EU effort in this field, reflected through the work of Council of European Social Science Data Archives (CESSDA), organization that gathers social data archives across Europe. In addition, we analyze the current practice of data archiving in Western Balkan countries and possibilities to build the prototype of DDA in Serbia according to the European standards

Public debt sustainability in Western Balkan countries

In this work we analyse framework for debt sustainability assessment (DSA), which is used by IMF country teams for the projections of mid-term debt-to-GDP ratio. Comparative analysis of DSA application to WB countries shows that under the baseline scenario, fiscal solvency of countries seems to be stable in period of five years ahead. Stress testing under the deterministic scheme of shocks shows that under the certain circumstances public debt of Montenegro, Albania and Croatia could turn to reach such high levels of debt-to-GDP that arguably could not be sustained in the long-run. Furthermore, we provide some methodological criticism and empirical evidence that DSA projections tend to underestimate or overestimate actual values even for short forecasting period ahead. We propose methodological improvements based on Garcia and Rigobon (2004) work and apply it on Serbian monthly data, comparing the results with IMF mid-term projections. Our projections of debt-to-GDP ratio in three years ahead give the significantly higher values than those given by IMF and strongly suggest that Serbia could face considerably high levels of debt-to-GDP ratio in mid-run, even without adverse macroeconomic shocks

Information and communication technologies as the basis for the improvement of companies' performance in Serbia

The possibilities of using information and communication technologies for business improvement are numerous, but many studies show that there are significant problems in identifying the real impact of ICT investments and companies’ performance. The first large problem arises in the field of definition of ICT in each company and the other one is connected with the link between the specific investment and selected performance measure. There is no standard measurement system and the results of individual studies are not comparable. The aim of this work is to explore this matter in Serbia. In this research we used the case study method, which was conducted in seven companies of different sizes and structures in the field of telecommunications, education, manufacture, accommodation and food service, financial and insurance activities and retail trade. Each of the representatives, mostly top management, gave answers about ICT assets and investments in their companies. The results of our research suggest that most of the companies in Serbia consider ICT assets and ICT investment as duty imposed by the business environment. The management of selected companies do not see obligation to treat the ICT investments as “regular investments” like building new facilities, purchase new machinery or expanding array of services. There is a strong possibility that Serbian companies overestimate or underestimate the value of investments in ICT because they do not use appropriate mechanism to control investments. Also, it is likely that investments do not lead to required results, because there is no control mechanism that measures the impact of certain investment on results or companies’ performances

Sinteza, karakterizacija i primena hidrogelova na bazi N-izopropilakrilamida i anjonskih komonomera za uklanjanje hroma, mangana i olova iz vodenih rastvora

In this doctoral dissertation, the hydrogels sensitive to temperature and pH changes based on N-isopropylacrylamide (NIPAM) and anionic comonomers (acrylic acid, AA, and methacrylic acid, MAA) were synthesized and investigated as adsorbent materials for removal of Cr(VI), Mn(II) and Pb(II) ions from aqueous solutions. The hydrogels were synthesized by radical polymerization process by varying the content of comonomer and crosslinker. The obtained poly(Nisopropylacrylamide- co-acrylic acid) (p(NIPAM/AA)) and poly(Nisopropylacrylamide- co-methacrylic acid) (p(NIPAM/MAA)) hydrogels were characterized using the following methods: Fourier transform infrared spectroscopy (FTIR), scanning electron microscopy (SEM), X-ray diffraction (XRD), high pressure liquid chromatography (HPLC) and determining the swelling intensity in aqueous solutions of different temperatures and pH values. Kinetics of hydrogel swelling before and after the lyophilization process, as well as swelling reversibility through 3 alternate swell-shrink cycles under the influence of temperature were investigated. A full three-level experimental design was applied in order to describe the swelling of synthesized hydrogels as a function of temperature, pH value and crosslinker content by a mathematical model. Characterization of p(NIPAM/AA) and p(NIPAM/MAA) hydrogels with adsorbed metal ions was performed by FTIR and SEM method. Heavy metal ions in the structure of hydrogels were identified by energydispersive X-ray spectroscopy (EDX). The influence of pH, temperature, contact time and initial concentration of heavy metals on adsorption capacity of hydrogels was investigated. The kinetic and equilibrium data match best to the pseudo-second order model and Langmuir adsorption isotherm. Based on the thermodynamic results, it has been concluded that the adsorption of Cr(VI), Mn(II) and Pb(II) ions from aqueous solutions onto hydrogels was spontaneous and exothermic process. The adsorption capacity of p(NIPAM/AA) and p(NIPAM/MAA) hydrogels for investigated metal ions decreases in the following order: Pb(II)>Cr(VI)>Mn(II). Hydrogels based on NIPAM and AA or MAA are considered to be suitable adsorbents for removal of Cr(VI), Mn(II) and Pb(II) ions from aqueous solutions, due to high efficiency in the temperature range from 25 to 45 °C

PEST Analysis of Serbia

The main purpose of this paper is to examine the impact of the current Serbian macro-environment on the businesses through the implementation of PEST analysis as a framework for assessing general or macro environment in which companies are operating. The authors argue the elements in presented PEST analysis indicate that the current macro-environment is characterized by the dominance of threats and weaknesses with few opportunities and strengths. Consequently, there is a strong need for faster implementation of structural changes in order to eliminate or minimize the impact of weaknesses and threats of the current macro-environment and create more favorable business climate that would enable companies to formulate effective strategies and to raise their business performances

Stochastic approach to debt sustainability analysis applied to Serbia

This paper examines the public debt sustainability of Serbia, based on integration of financial gap analysis approach and stochastic modeling and forecasting of relevant macroeconomic and fiscal variables. Within this analytical framework, sustainability is interpreted as whether underlying policies can be sustained under plausible macroeconomic conditions without endangering solvency (Debrun, Celasun and Ostry, 2006). Conventional debt sustainability analysis is conducted as a simple accounting exercise, based on deterministic forecasts of variables that are included into debt accumulation equation and arbitrary scheduled bound tests. However, because debt sustainability is a forward-looking concept, it cannot be assessed with certainty (Wyplosz, 2011). Stochastic approach to debt sustainability as an alternative to conventional debt analysis takes into account the high degree of uncertainty surrounding medium-term debt trajectories, which cannot be captured by simple bound tests as these are limited in number (ECB, 2012). The recent research in this area (Garcia and Rigobon, 2004; Debrun et al., 2006; Kawakami and Romeu, 2011) mainly uses a Vector Autoregression (VAR) modeling as a basic framework for econometric estimation of the relationships among interest and exchange rates, inflation and primary balance and their forecasting and simulation. In addition, impulse response analysis is based on calibrated shocks obtained by Cholesky decomposition of variance-covariance matrix of the regression residuals. We apply stochastic approach to Serbian monthly data, run simulations of debt-to- GDP ratio and compare the results with IMF and Serbian Government mid-term projections. Our projections of debt-to-GDP ratio in two years ahead based on VAR approach gives the similar forecast relative to those given by IMF, while projections based on AR(1) approach seem to overestimate debt-to-GDP ratio with increase of forecast horizon. Yet, our forecasts strongly suggest that projection of Serbian government of debt-to-GDP ratio is too low and consequently misleading