Abstract
This study deals with important issues related to the new political macroeconomics and its appliance to the economic movements in Serbia, which is a country of ?new democracy? as well as with transition economy. In political macroeconomics, it is a known fact that the economic policy instruments can be used for political purposes - simulated improvement of economic indicators to win the elections. These options assume specific features in transition economies, such as the Serbian economy. The political instability in Serbia, reflected in frequent elections, as well as in the diversity in political and economic goals of the key political parties leading to increasing political uncertainty in both the pre-election and post-election periods, weakened the economic system. Simultaneously, using the economic policy for political purposes to support the ?pro-democratic? and ?pro-European? parties proved to be paradoxically justified.
Highlights
For the analysis of political influence on the economic policy in Serbia as a "new democracy" country, it is relevant to observe the studies of these phenomena in other "new democracy" countries, which show that it is primarily present in the area of fiscal policy in the form of political budget cycles, a term introduced by Rogoff (Rogoff 1990)
The abuse of fiscal policy in Serbia in the form of fiscal manipulation has the following specific characteristics: (i) economic policymakers know the preferences of the population – income growth and price stability; (ii) economic policymakers are able to successfully manipulate economic policy, because voters are "myopic" or "selfish" – interested in improving, even in the short run, their own positions; (iii) in fiscal manipulation, economic policymakers choose the model of fiscal manipulation that targets certain groups of voters, and not the entire electorate, to avoid a significant increase in the budget deficit and win votes; (iv) sources of fiscal manipulation in the pre-election are the privatization revenues that the country has from public enterprises privatization
The economic performances decisively influence voters and their behavior, and policymakers are aiming at re-election, while those in opposition strive to win and come to power
Summary
Macroeconomic theory is a kind of stalemate, because its method is basically inadequate for the reality and existence it should explain. Government’s competence is defined in different ways in the rational opportunistic models: by capability to implement appropriate fiscal policy (Rogoff and Sibert 1988; Rogoff 1990); by providing economic growth not followed by inflation (Torsten Persson and Guido Tabellini 1990); and by isolating economy of random shocks that affect it (Cukierman and Melcer 1986). Economic origins of democracy could be determined by the triangle of the following factors (Acemoglu and Robinson 2006): (i) economic incentives determines the political behavior and individual act rationally according to game theory; (ii) conflicts have a key role because different social groups have their separate interests about possible social outcomes; (iii) political institutions have a central role in the process of solving conflicts, as they define future distribution of de jure political power. The third significant wave of democratization refers to democratization of the former socialist countries in the period of 1990s, which occurred parallel to significant economic changes – transformation of the former socialist economies into market economies
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