THE DETERMINANTS OF CORE INFLATION IN THE REPUBLIC OF MACEDONIA

We investigate the determinants of core inflation in Macedonia and show that the most important drivers of the cumulative core inflation in the post crisis period i.e. between 2010-16 relative to 2008-09 are underutilization of labor in the form of involuntary part-time employment and headline unemployment rate. Both indicators have contributed positively to cumulative core inflation since 2015 but headline unemployment rate much less so. The contribution of trend productivity growth has remained negligible. Sluggishness in core inflation faced against the background of relatively buoyant activity in the post-crisis period—has corresponded with slow pass through from declining unemployment rates to faster wage growth. We suggest that core inflation rates in Macedonia will likely remain low unless wage growth speeds-up beyond productivity growth more sustainably

INCOME AND PRICE ELASTICITIES OF MACEDONIAN EXPORT AND IMPORT OF GOODS – A PANEL APPROACH

This paper uses a sectoral version of the conventional Imperfect substitutes model to motivate a parsimonious estimation of trade elasticities. The elasticities we compute depend directly on the specialization of trade across sectors, which is believed to add econometric precision to our estimates. On the other hand, estimates of income and price elasticities in the existing literature dealing with the case of North Macedonia are typically obtained from aggregate data, which tend to mitigate the importance of sectoral specialization. The basic assumption of the imperfect substitutes model is that neither imports, nor exports serve as perfect substitutes for domestic goods. Moreover, our import and export functions along with the income and price variables, consider some additional parameters as well, such as foreign direct investments and tariffs on imports. To this end, we were able to obtain theory-implied estimates of import and export income and price elasticities for North Macedonia – i.e. trade elasticities relevant to policy - and ultimately to calibration choices. The income and price elasticity coefficients, both in the import and in the export model, have the expected signs - increases in income positively affect exports and imports (coefficients of 0.29 and 0.85, consequently), while increases in prices lower them (coefficients of -0.23 and technically 0, respectively). Judging by the size of the coefficients, incomeeffects appear to be much more substantial than price effects

Forecasting Macedonian GDP: Evaluation of different models for short-term forecasting

We evaluate the forecasting performance of six different models for short-term forecasting of Macedonian GDP: 1) ARIMA model; 2) AR model estimated by the Kalman filter; 3) model that explains Macedonian GDP as a function of the foreign demand; 4) small structural model that links GDP components to a small set of explanatory variables; 5) static factor model that links GDP to the current values of several principal components obtained from a set of high-frequency indicators; 6) FAVAR model that explains GDP through its own lags and lags of the principal components. The comparison is done on the grounds of the Root Mean Squared Error and the Mean Absolute Error of the one-quarter-ahead forecasts. Results indicate that the static factor model outperforms the other models, providing evidence that information from large dataset can indeed improve the forecasts and suggesting that future efforts should be directed towards developing a state-of-the-art dynamic factor model. The simple model that links domestic GDP to foreign demand comes second, showing that simplicity must not be dismissed. The small structural model that explains every GDP component as a function of economic determinants comes third, “reviving” the interest in these old-school models, at least for the case of Macedonia

Real Estate Prices in the Republic of Macedonia

In this paper we construct a hedonic house price index for Macedonia, for the period 2000-2008. Then we investigate whether house prices in Macedonia are in line with the fundamentals, finding a positive answer

Real Estate Prices in the Republic of Macedonia

In this paper we construct a hedonic house price index for Macedonia, for the period 2000-2008. Then we investigate whether house prices in Macedonia are in line with the fundamentals, finding a positive answer

Problematic aspects of working time duration and working time regime

The Labour Code provides that the working time is any period of a time during which worker is at the employer’s disposal or when he performs his duties under his contract of employment. Undoubtedly, working time can’t last for as long as the employer wants so the Labour Code also provides concepts such as working time duration and working time regime. The legislation provides that workers are normally required to work 40 hours a week and in exceptional cases, without prejudice to the maximum working time requirements worker may work longer or shorter if work associated with a higher mental and emotional tension or the health-damaging environment. Before the entry into a force of a new version of the Labour Code, a very strict working time regulation model was established in Lithuania. However, with the change of a many Labour Code norms labour relations became more flexible, working time institute also changed. The new Labour Code provides that the worker who wants to earn extra money can work more overtime. Also, with the aim of avoiding abuse, the accounting period was shortened. Of Course, this is only a small part of all changes, but it’s enough to say that working time regulation has improved. However, despite all the changes, problematic issues stemming from the working time institute and both of its sub-institutes still remain. In order to reveal and evaluate all the problematic aspects related to working time duration and working time regime in this master's thesis international, European Union and national legal acts regulating labour time are analysed. Evolution of working time, its duration and regime are also examined. Working time and working time regime, as well as the problematic issues associated with them, are analysed in detail presenting possible ways of resolving such issues

Inflation Persistence and Price Dynamics in Macedonia: Theory and Empirical Analysis

We apply classical econometric method to characterize the dynamic behavior of the quarter-on-quarter inflation over the period 1997q1-2010q1. In particular, we estimate univariate autoregressive (AR) models for the aggregate consumer price inflation series and as well as for the consumer price inflation at representative product groups level, taking into account the influence of structural breaks in the mean of inflation on the level of persistence. We find strong evidence for a break in the mean for the housing, transport and communication services and culture and leisure inflation. Allowing for a break in the mean of inflation, the inflation measures generally exhibit relatively lower inflation persistence. We also analyze price dynamics in Macedonia at representative products level over the same period

Alternative Indicator of Monetary Policy Stance for Macedonia

This paper applies a SVAR model which combines different monetary policy instruments to construct an alternative indicator of monetary policy stance in Macedonia. It employs the approach introduced by Bernanke and Mihov (1998) of isolating monetary policy shocks from the whole set of monetary policy instruments that otherwise react to real developments. The residuals from such VAR are cleaned from the central bank's reaction function and represent true monetary policy innovations. Furthermore, we solve the interdependence among different monetary policy instruments contained in the residuals by developing a structural model. We use the model to extract unanticipated policy stance, as an alternative view on the monetary policy

The economic impacts of the foreign direct investments: panel estimation by sectors on the case of Macedonian economy

This paper elaborates the economic impacts of the foreign direct investments (FDI) on the case of Macedonian economy. Most developing countries consider FDI a vital source for their development. Anyway, it is quite difficult to measure the economic effects of FDI over the host country, having in mind their numerous direct and indirect effects. Besides the amount of FDI inflows, the economic benefit will also depend on their structure. Based on a panel regression technique, the FDI impacts on GDP, export and employment on the case of Macedonian economy have been estimated, taking into account for their structural dimension. The main conclusion of the analysis is that the FDI inflows were important factor for GDP growth and export performances of the Macedonian economy. On the other hand, the FDI impact over employment is negative mainly due to the low level of green field investments and non attractiveness of the labor intensive industry for the foreign investors. These findings regarding the type and sector distribution of the FDI inflows are very important for the policy makers and imply a need for a strategic approach in this field