Privredni ciklusi u Srbiji i njenim EU susedima

Abstract

In this paper, we have analysed business cycles in Serbia and its five neighboring EU Member States (Bulgaria, Romania, Hungary, Croatia and Slovenia) for the Q1Y2000-Q3Y2017 period. This period was long enough to capture two depressions and two prosperity stages. The analysis was based on a RBC stochastic DSGE model because it ignores differences among countries due to particular monetary policies, and works with a small number of mutually compatible time series. Business cycles in Serbia are similar to those of the neighboring countries; particularly, all economies considered were hit by the Great Recession. They are now out of the depression stage and the period of prosperity is highly likely to continue for the next four years. Some countries, such as Hungary, entered the depression early and the shape of its business cycles had the form of the letter U. The other countries, such as Serbia, had the letter V profile of depression, with different duration and slopes of the letter wings. Serbia was not hit the hardest by the depression; that was Romania, but it recovered faster than Serbia and is now performing the best in the region. The problem concerning Serbia was that it stayed in the depression for the longest period of time, that its period of prosperity will probably end over the four-year horizon, and the cycle of capital accumulation is still in the stage of depression. Policymakers in Serbia need to do something to improve investment activity. We conducted simulations with conditional forecasts encompassing promotion of FDIs, and concluded that such a policy might bring positive impacts on growth. However, our other simulations clearly indicated that the optimal strategy for promoting growth should focus on improving total factor productivity instead of meddling with investment. That would imply institutional reforms and educational adjustment to match requirements of the new Industrial Revolution 4.0. We are sceptical that the Serbian policymakers will pay due attention to higher education reform and institutional changes as they did for subsidising FDIs.