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Contribution/ OriginalityThis study is one of very few studies which have investigated how the exchange rate regime can improve the situation of Macedonia on the road into the EU. The study contributes to the existing literature in the sense that it used VECM estimation model to estimate collected data and to analyze the causes that throw more light on how Macedonia can benefit from the type of exchange rate regime.
The pandemic recession was fundamentally different from ordinary recessions, and thus required a different policy response. We review the empirical literature on fiscal consolidation and fiscal multipliers. Then, we assess the impact of fiscal policies on the pace of recovery and public debt sustainability. A premature or a strong fiscal consolidation might result in lower rates of economic growth and elevated public debt as a share of GDP. We critically analyze different adjustment paths across Europe and offer policy-relevant recommendations. The issue is particularly relevant for countries with a strong fiscal stimulus and moderate to high levels of public debt.
North Macedonia is relying on Market Failure theory for the role of Government in the economy. The Government should take a back seat and simply create condition for private sector to invest and generate growth. Thus, public expenditures are kept at 1/3 of GDP for many years. Private sector investments in fix assets are anchored on average in last two decades at 22.4 percent of GDP. Result has been a moderate growth, that is not sufficient in foreseeable future to close the gap in living standard between the North Macedonia and EU. Innovative ecosystem and de-risking private sector investments is perceived more adequate model for achieving smart, sustainable and green growth. Such policies must put innovation at heart of growth policies. The Government should have a mission to fund innovations, direct economy to green and smart. This will require public expenditures steadily to reach threshold of 40 percent of GDP. Higher private investments: domestic and foreign, should be attracted by de-risking private sector and by strong private public partnership. This should accelerate growth to 5 percent on long-run, make it more inclusive and secure swift living standard convergence towards EU.
Because of the fact that South-eastern European countries rely mainly on exchange rate anchors to reduce inflation, the appreciation of the real exchange rate among countries in the region
Contribution/ OriginalityThe study contributes to the existing literature in the sense that it used econometrics to estimate collected data and to analyze the causes that throw more light on how Macedonia can benefit from the type of exchange rate regime thus speeding the convergence process to EU.
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