This paper throws additional light at the genesis, true causes and inevitable consequences as well as at the present moment of the Eurozone crisis. Building on my previous work, I argue that political deliberations and macroeconomic ignorance dominate and misguide public policy discourse within EMU. Inability of decision makers to discern sunk costs of the Eurozone crisis from the marginal cost of further hesitation, wasted precious time, money and whatever solidarity potential was there at the onset of it, making some mutualisation of sovereign liabilities inexorable if EMU were to survive in its current size. Paper explains why grassroots of the Eurozone conundrum reside in the EMU's Core, even though troubles initially appeared to be entirely with the EMU's Periphery. After debunking stubbornly advertised myth with regard to what's amiss in the Eurozone, I pinpoint crucial mistakes in the EMU's macroeconomic response. Unfortunately, due to the rising marginal cost of hesitation, even if proper macroeconomic mix were to be deployed, some sovereign debts in the Eurozone would probably have to be forgiven.
In order to keep up even the present (already crisis stricken) trend of economic growth, by 2050 mankind would have to consume three times the quantity of biomass, mineral and fossil fuels as well as ores per annum than it consumes today, with proverbially drastic gap between consumption of developed vs. developing, resource-abundant vs. resource-constrained economies, along with global consequences for the environment and bio-economic constellation in which we are to leave our posterity. In contrast, relevant UN institutions have been warning for years that under current demographic developments (10 billion people by 2050) and rising economic welfare in key parts of the emerging world additional progression in annual and per capita consumption of non-renewable or slowly and hardly renewable natural resources simply doesn't represent a viable option any longer.Finally, for small open economies in transition, Gordian knot of simultaneous tackling environment protection, balanced regional growth, poverty reduction, favourable birth rate, attractiveness for foreign investors and snappy rural development, definitely becomes ever more tightened and entangled than ever before. Over the last 60 years world economy has lost around 20% of top notcharable land, fifth of its rain forests and thousands of plant- and wild-life species, while CO2 emissions together with other human agents have pierced the ozone layer and caused the greenhouse effect[Haider Zaidi, 2008]. Nevertheless, Grossman and Krueger (1995) in their seminal paper from the end of XX century were the first to realize that continuous or even accelerating economic growth does not result (at least not inevitably) in pro rata pollution increase and worsening environment quality. As a matter of fact, experiments of an array of researchers thereafter confirmed a concave parabolic shape of relationship between pollution cum resource depletion (on ordinate) and economic growth i.e. income (on X axis), relationship which for its resemblance with Kuznets's (1955) findings5 in respect to income inequality trajectory in developing economies was dubbed Environmental Kuznets Curve (EKC). This paper reviews theoretical paradigms and empirical investigation of topsy-turvy relationship between environmental policies (or lack thereof) and economy's growth efforts. By utilizing EKC, Green Solow and alike frameworks we reexamine the environmental triangle of varying 1)activity scale, 2)output composition in terms of cleanliness or outsourcing and 3)production/abatement technology advances for growth dynamics in a small open economy. After introducing the problem of internalization distribution of externalities, this research briefly reflects on theoretical insights a propos EKC and variations of its empirical verification, only to move on to specific ingredients of environmentally sustainable growth path, including international trade and globalization impact, as well as ecological standards imposed by aspiring EU accession. First of all, the paper deals with prerequisites and determinants of inverted U-shaped curvature of EKC, followed by instruments at disposal of economic policy makers to that end, notwithstanding foreseeable investment induced by politeconomic and ecological trends in Western Balkans. The rest of the paper is organized as features: Section 2 reviews theory and policy ofenvironmental externalities and determinants of concavity of EKC relationship.Section 3 deals with origins of green growth for small open economy (emphasizing ways to reach negative slope of EKC more quickly and enhance its concavity), with special attention paid to impact of environmental policies on international trade flows, globalization of investment and plant location. Section 4 goes on to conclude what lies ahead for small open economies of W. Balkans in terms of interaction between environment and their economic growth, followed by bibliographical register at the very end.
In this paper, we put under scrutiny the blueprint of the Eurozone's banking union in trying to confront and contrast the shortcomings of the currency union and malaise of the euro-crisis at hand with the aims, instruments and scope of the banking union itself. After investigating direction of causality between the weak banking sectors and the week sovereign (public) finances, we go on to rectify both the objectives and design of the Eurozone's banking union (EBU). This paper argues that EBU has been deployed to deal with wrong problems equipped with ill-suited tools, which accounts for its early paralysis. However, the fact that leading members of the Eurozone hastily passed national legislation which exempts their strategically important banks from the outreach of the European Banking Authority they themselves have just established, casts doubt that the aforementioned financial polio may disguise something much more sinister coming up. One way or the other, we claim that the EBU stands no chance whatsoever without further "federalisation" of the E(M)U, although its functional survival may be arranged both with and without Germany's continued participation.
Current international financial crisis of apparently unprecedented scale (ever since the Great Depression of 1929) could have been spotted from afar and should have been nipped into a bud as early as in 2002! Global political and financial elites are not unable to find the solution to it, they are simply unwilling to identify the problem. The IMF and the BIS once again proved to be useless in their own professional backyard, since it was and still is politically incorrect and financially unremunerative to do so. Crisis has been amplified by sky-rocketing food and oil prices, lax regulation of credit derivatives and cheap-money policy worldwide, but essential culprit of this latest global distress is the greed of the international financial community that spawned fancy asset-backed securitized monsters, which came in too many guises and ultimately got out of hand. Financial mutation brought about jitters of illiquidity across the industry and likely return of depression economics. The paper deals with ill-suited handling of the crisis and probably dire consequences for both the present financial architecture in the economic centres and the future of developing countries at the periphery.
Amidst XIX century, Principality of Serbia was still a country of small landowners with 73% of territory dedicated to agriculture, divided into fiefs up to 5 hectars in size. Owing to her geographic position, Serbia was simultaneously a transit area for trade caravans coming from South and Central Balkans as well as for those travelling from outhwest via N. Pazar. Therefore, trade has always played a rather important, vital role in development of the Principality of Serbia. hence, thriving and ever richer class of merchants quickly supported passing the Trade Bill for Principality of Serbia with authorisation of "Miloš Obrenović the First Serbian Principal along with agreement of the Council following proposal of the National Assembly" 26th of January 1860 A. D. The fact that this bill had been passed three years ahead of the Austrian and full fifteen years before hungarian Trade Bill is definitely noteworthy (Niketić, 1923, pp. 147). Serbian Trade Bill strongly drew from the French Code Commerce, especially in articles regarding establishment and day to day functioning of business entities, but also from the Civil Code of the Principality of Serbia (brought about 1844) whose author was Jovan Hadžić (Đorđević, 2008, pp. 62-84). The very passing of the Trade Bill for the Proncipality of Serbia indicated gradual build-up of political atmosphere which enabled breakthrough of fresh ideas in all aspects of social life. So, for instance, backed by §38 of the Trade Bill, in February 1869 Ministry of Finance issued licence for founding the first private money fund in Serbia. The First Serbian Bank was projected to start with capital of one million ducats. Nevertheless, once opened for business, on the 2nd of October 1869, it turned out that it's IPO managed to amass only 120,000 ducats (1,440,000 French francs at the time) [Mitrović, 2004, pp. 33]. As it happened, legislation in the Trade Bill was insufficient for establishment of such complex business entities. Therefore, already in 1871 not only its shareholders went bankrupt, but also its creditors and the state itself - demise having been speeded up by the bank's attempt to act both as a comercial bank and engage in a purely speculative investment. Bankrupcy of the First Serbian Bank was an important if stressful financial experience for the young Serbian state. The downfall of Prva Srpska bank was an important financial experience for young Serbian State. That is supported by the fact that in 1871 during incorporation of first joint-stock banks with domestic capital (Beogradski kreditni zavod, Smederevska kreditna banka i Pozarevacka banka) the State decided to enact special decrees, specifying their activities, as well as their rights and responsibilities. Given that in number of existing provisions of Serbian commercial law relating to incorporation of public companies (31-38, 41 and 44) there had been no provisions sanctioning unconscionable business dealings, it was decided that a special Decree on trading of banks dated 24 September 1871 will in its first provision state that 'false creation as well as imitation of any document which the mentioned institutions would issue, will be punishable equally as false creation or imitation of public documents. During following years, until creation of Privilegovana Narodna banka 1884, apart from the mentioned three, only four additional (mainly local) banks were formed with the total founding capital of modest 3.2 million dinars. On the other hand, until the beginning of the 1880s, Serbia did not have either a private or a public financial institution for poorest classes of tradesmen and craftsmen. The only source of loan capital was loanshark capital from rich city tradesmen and high public servants. As well as Serbian peasants, small tradesmen and craftsmen used to paid yearly interest to loansharks between 24% and 50%, with lower amounts on short term carrying a yearly interest of up to 120%. The Serbian authorities on number of occasions attempted to create publicly managed funds to address the issues of lending and loansharking, mostly without success. The more serious attempt of the State to secure lending capital for public was the creation of the Funds Directorate at the Ministry of Finance, in 1862 commencing with work in 1864. Funds Directorate provided long term loans with 6% annual interest by taking a mortgage over up to 50% of estimated value of immovable property. Tradesmen and craftsmen could grant a mortgage over their houses and land, which meant that loans were available only to relatively better off tradesmen and public servants. Newspaper "Belgrade Daily" ("Beogradski dnevnik") wrote in 1882: "It is known to every Belgrader that money is very scarce. however, our people, as everywhere else, often need money. What happens? Richer tradesmen and capitalists easily help themselves, as in case of need, on their land and on their signatures, they secure money with moderate interest. What happens when a poorer tradesman, craftsman or a public servant gets into the financial need? What? Let's be honest and say the truth: less well-off class can only turn to loansharks, who, seeing him in the need, fleece his skin off, charging 20, 30, 40, often 50% interest. What is the consequence of that? That class becomes overindebted and goes under" (Aleksić, 2012, pp. 108-133).
After two decades of being a monetary unification gospel, EMU is at a brink of dissolution. The European (Monetary) Union, including its political significance and economic future has been hanging in balance ever since the May of 2010, most recently reaching the very end of the rope. This paper attempted to discern historical and constructional origins of the Eurozone crisis, layers or ingredients of the ongoing peril as well as to identify a short-term technical policy response, necessary for avoiding the imminent break-up of the EMU. Last but not least, the article developed a game theoretical pay-off matrix in order to consider the menu and tentative likelihood of representative agents' available strategy pairs, that in turn revealed three distinct equilibria, one of which will decisively shape the immediate outlook and ultimate fate of the Eurozone. However, the current pairs in the core vs. periphery pay-off matrix of apparently pursued strategies do not lead to the desirable, superior Nash equilibrium. Out of three bargaining equilibria possible, only two are Nash-stable and only one associated with EMU's survival. It is hard to say whether the EMU will be lucky and wise enough to weather this crisis. It is easy to say that feasible macroeconomic solutions won't be pleasing for many of its members
The paper explores the main causes behind- and spreading mechanics in- the wave of sovereign debt overhangs that has been mounting recently across Europe. We offer two concurrent explanations: international contagion of a macroeconomic shock, and structural flaws in the design of E(M)U and its development paradigm. Moreover, we found the immediate policy response to have repeatedly gone awry and turned sour, since EMU's tactics of bailing out their banks rather than their sovereigns, can be summarized as the policy of too little, too late and to the wrong beneficiary. In compliance with the identified causes, we suggest urgent recourse to the healthier banking, growth oriented yet thriftier public finance, jointly with other measures meant to boost European economies' competitiveness.
Objective of this paper is to empirically examine whether widespread unofficial dollarisation plays significant role in determination of exchange rate dynamic in Turkey and Serbia, as one big and one small of the EU candidate countries under managed floating currency regime and synthesize consequent policy recommendations. Our time-series approach utilised monthly data from 2006-2016 to research the aforementioned relationship. After resolving non-stationarity issues, we deployed GARCH analysis to pinpoint the sources of volatility. Our research shows that in Serbia dollarisation has significant and robustly positive influence on exchange rate levels, but not so in Turkey, whose national currency is pretty robust in levels yet its volatility is more sensitive than Serbian dinar to volatility of dollarisation. In addition, Serbian foreign exchange reserves share in the money supply positively influences dinar-euro nominal exchange rate volatility, while Turkish reserves' share in money supply has negative impact on exchange rate volatility. Even though uncovered interest parity doesn't hold in either of countries, Serbian dinar is somewhat susceptible to interest rate manipulation, unlike Turkish lira. In the end, one could conclude that flexible exchange rate has more sense and better results in Turkey than in Serbia, but rational choice between earlier-agreed upon or unilateral-official dollarisation on the one hand and continuing with managed (systematic) floating on the other in these two EU candidate countries, requires additional, more precise cost-benefit analysis, as formalised in the discussion and suggested for future research.
Currency substitution is widespread in less developed countries. Since it increases financial vulnerability and limits the effectiveness of monetary policy, it is often in the focus of scientists and experts. In this paper, we analyze the importance of euroization determinants in Serbia and neighboring countries - Albania, Bosnia and Herzegovina, FYR Macedonia, Romania and Croatia for the period 2003-2014. We examine the impact of domestic inflation, nominal exchange rate of the domestic currency against the euro, interest rate spread on domestic and foreign currency, foreign currency inflow in the form of foreign direct investments and exports, as well as the euroization of banks'financial resources on the degree of loan euroization. The results obtained by multiple regression panel methods confirm the statistical significance and assumed direction of the influence of all analyzed variables except inflation and current account balance.
