ASSESSING THE EUROPEAN CENTRAL BANK’S UNCONVENTIONAL MEASURES - A RECURSIVE VAR APPROACH

MSc. Filip Peovski[1] PhD. Gjorgji Gockov[2]   ASSESSING THE EUROPEAN CENTRAL BANK’S UNCONVENTIONAL MEASURES – A RECURSIVE VAR APPROACH ABSTRACT             Unconventional monetary measures utilization has proven to be of great importance in maintaining monetary and economic stability after the Great Recession. However, we aim to test this conclusion through the impact of the quantitative easing implemented by the European Central Bank. Observed through generated shocks in the balance sheet of the Eurosystem as our main variable, we tested whether quantitative easing reestablished economic growth and rose price levels, mainly through lowering borrowing costs for banks, thus helping in the post-crisis recovery. To prove our hypotheses we construct a recursive VAR model estimated in levels using 2014M05-2018M12 data. The model incorporates variables such as the industrial production and the HICP, as output and price level proxies, and financial components such as the EONIA-MRO spread and the CISS index. The results show that the expansion shocks of the consolidated balance sheet have a positive temporary influence on industrial production and the HICP, but the reaction of the former seems to be 2.24 times greater. On the other hand, we find out that quantitative easing has an expected negative impact in widening the EONIA-MRO spread. Furthermore, we could not confirm the theoretically expected accommodative impact on financial stress. Keywords: Unconventional monetary measures, price stability, policy interest rates, recursive VAR model JEL Classification: C32, E43, E52, E58   [1]  Teaching and Research Assistant, Faculty of Economics – Skopje, “Ss. Cyril and Methodius” University, e-mail: [email protected] [2] Associate Professor, Faculty of Economics – Skopje, “Ss. Cyril and Methodius” University, e-mail: [email protected]

FACTORS DRIVING THE PUBLIC DEBT DYNAMICS: THE CASE OF REPUBLIC OF MACEDONIA

The global financial and economic crisis has placed a significant strain on public finances in many economies. Since sound public finances are crucial for price and financial stability and for economic growth, concerns about rising debt commitments have led to a renewed interest in the analysis of debt sustainability in the last decade. This paper discusses the concept of fiscal sustainability and investigates the factors driving the public debt dynamics in the Republic of Macedonia over the period 2004-2021. Although the level of indebtedness is still moderate (below 50% of GDP), the public debt dynamics from 2008 is worrying (public debt has doubled in only 7 years). The starting point for assessing debt sustainability is the government budget constraint equation. This equation explains the evolution and accumulation of government debt by three main factors: the primary balance, the “snowball” effect, and the deficit-debt adjustment. The conventional debt sustainability analysis showed that the general government debt ratio over the period 2004-2017 increased moderately as a result of a significant increase in the primary deficit (by 16 p.p.), that was almost completely offset by the positive “snowball” effect. In addition, we found that in the pre-crisis period (2004-2008), the general government debt ratio declined significantly, mainly as a result of a positive “snowball” effect but also because of the primary surplus. Contrary to pre-crisis developments, the general government debt ratio increased significantly (by 19 p.p.) in the post-crisis period (2009-2017), due to the significant primary deficit increase, while the positive “snowball” effect was moderate

Determinants of Liquidity and its Relationship with Profitability – The Case of Macedonian Banking Sector

This paper deals with the liquidity and profitability of the Macedonian banking sector and attempts to identify the determinants of liquidity mainly focusing on the relationship between profitability and liquidity. First, we analyzed the level of liquidity and profitability and we found that the Macedonian banking system is characterized by high liquidity and relatively high profitability compared with the banking systems of the countries in the region and the more developed economies. Furthermore, the paper examines the determinants of liquidity. The empirical analysis is carried out through the use of the dynamic panel analysis based on the generalized method of moments (GMM) methodology on a dataset of overall banking sector operating in Macedonia in the period from 2007 to 2017. The study uses seven factors as potential determinants of banks liquidity, five of them are internal banks variables (lagged value of liquidity, bank profitability, size of the bank, capital adequacy and non-performing loans) while two of them are macroeconomic variables (GDP growth rate and Central bank reference interest rate). The study showed that profitability is one of the most important factors influencing liquidity in the Macedonian banks. The other determinants with important positive effects on liquidity are lagged value of liquidity, non-performing loans and Central bank interest rate but, to a somewhat lower extent. On the other hand, only the size of the bank is significantly inversely associated with bank liquidity. The capital adequacy and GDP growth rate are not statistically significant factors of Macedonian banks liquidity

Determinants of real convergence in Central and Eastern Europe

This paper deals with the process of convergence of the Central and Eastern European (CEE) countries towards the EU and attempts to identify the main driving factors behind this process. In these regards, we first provide an overview of the real convergence through an analysis of several economic variables – rate of approximation of real GDP per capita and price levels, trade integration, harmonization of the economic structure and achievements in the labor market. In addition, we offer a formal econometric evidence on the main determinants of the convergence process, based on a panel data for 10 CEE countries during 2000-2015 period, estimated with fixed effects. The results of our study imply that higher savings and investment ratio, higher labour productivity, more efficient labour markets (lower unemployment) and macroeconomic stability (lower inflation and lower budget deficits) are conducive to real convergence. However, quite surprisingly, we find that the close trade integration with the EU is associated with lower level of real convergence

How Monetary Policy Affects the Lending and Economic Activity in a Banking System with Excess Liquidity

Research purpose. The purpose of this paper is to examine the efficiency of the transmission mechanism of the monetary policy in a banking system with excess liquidity. More specifically, it aims to examine how the interest rates of the central bank bills and inflation rate affect total lending and the overall economic activity in the country. For this purpose, the analysis is based on the case of the Republic of North Macedonia, whose banking system has exhibited excess liquidity in the past decade

Designing a Balanced Scorecard as Strategic Management System for Higher Education Institutions: A Case Study in Macedonia

European higher education institutions (HEIs) in the last two decades have faced a number of challenges: reduced public funding, increased competition from foreign and private universities, constant pressures and demands for their greater quality, and constant changes of education laws and legal regulations. The only way for fast adjustment of HEIs to the new competitive conditions is to explore all possibilities for effective implementation of some of the most popular management concepts such as Balanced Scorecard (BSC) system. Although the application of the BSC in the business sector is well documented, limited research has been reported regarding the application of the BSC in the education sector. For this purpose, relied on the existing literature, reported results and experiences from its implementation in business, firstly, we propose a suitable process for building a BSC system for HEI, and then we design a specific Strategy map and BSC system applicable for the Faculty of Economics-Skopje, Ss. Cyril and Methodius University, easily adaptable for implementation in other HEIs