The role of monetary and financial reform in approaching the European Union: the case of Serbia

摘要

By making use of various social science research methods, in particular semi-structured interviews, this thesis reveals the main features of the Serbia’s 15-year long transition experience, which took place against a background of frequent constitutional changes over the period 1989 to 2004. Serbia’s transition began in December 1989 with the Markovic programme, while the Republic was a constitutive part of the Socialist Federal Republic of Yugoslavia (SFRY). The study confirms that the SRFY was the first country to start transition from a socialist to a market economy, but that this advanced position was lost due to a lack of political consensus, and the dissolution of the country in 1991.ududAs part of the Federal Republic of Yugoslavia (FRY) which was formed in 1992, Serbia during the 1990s went through the most devastating period in its modern (economic) history, experiencing the second highest and the second longest hyperinflation ever registered (1992-94). The battle against (hyper) inflation and economic recovery took the form of the Avramovic programme of January 1994, but failed to delivery any prolonged stabilisation and growth. Additionally, during the period of FRY, when Slobodan Miloševic was in power, an extensive regime of economic and non-economic sanctions were imposed on Serbia by the international community (1991-2000). Moreover, in 1999, the country was faced with the seriousness of the Kosovo conflict and NATO bombing, and the concomitant impact of these events on economic life. As a result of all this, Serbia’s transition process was stillborn throughout much of the 1990s and public confidence in the state institutions, including the National Bank of Serbia (NBS), was entirely lost.ududTransition resumed in 2001, following the ‘bulldozer revolution’ of 5 October 200, and has since followed the main postulates of the transition blueprint which was based on the so-called “Washington Consensus”. The exchange-rate based stabilisation programme brought positive results as early as 2002 and 2003, notably in bringing down inflation. The combination of a de facto fixed exchange rate regime (formally announced as a managed float) and gloomy prospects of an ever-raising current account deficit and public debt, however, gave rise to a wide-ranging debate on the role of exchange rate and monetary policy in the overall profess of economic recovery. Our analysis reveals that there is a space, although limited due to the high “euroisation” of the Serbian economy, for a more active monetary policy. This would allow a substantial depreciation of the real dinar exchange rate, of importance given the demands of WTO and EU membership, namely full capital account liberalisation.ududSince February 2003, Serbia again changed its constitutional robe by becoming a member state of the State Union of Serbia and Montenegro. Following this constitutional change in June 2003, after a decade-long delay, Serbia's central bank reform was eventually initiated and the new NBS Law was enacted. The evidence contained in this work suggests that the NBS's legal independence perfectly matches the transitional average, but that the actual NBS's independence is a cause for concern. So as to prevent the inclusion of the 'systemic error' into the new Serbian constitution - by which a single person (i.e. the governor) is the sole source of monetary policymaking - the study proposes several principles which may guide the drafting process. Additionally, the thesis points to provisions of the current NBS Law which need to be adapted in line with the EMU acquis. The study concludes by rising the question of how the NBS's credibility can be restored, proposing a new NBS's approach to transparency as a possible solution.