<abstract xmlns="http://www.w3.org/1999/xhtml">In the aftermath of the UK referendum on June 23rd, 2016 that resulted in a sonorous negative decision regarding the willingness of the British people to remain in the EU, a significant number of alarming questions have emerged. Although Europe should have forged in crises, nowadays, many compromises have to be made in order to maintain the European construction as intact as possible. The question we attempt to answer is whether a new phase of unconventional monetary policy in the form of QE would be appropriate to lessen the threat of an upcoming crisis. This is why we examine Eurozone QE perspectives through the prism of the new EU era without the UK in order to highlight the pros and cons of the historical Brexit decision. As new rounds of unconventional monetary policy are believed to be essential for supporting the weaker countries in the European south, perspectives of non-conventional success could alter and optimal policies be substantially reformulated subject to the newly-arising constraints. Based on the main scenarios about the UK’s relations to the European Union in the near future, we estimate how a new round of non-conventional measures could affect the Britons as well as the European citizens. Moreover, we try to assess the viability of each of these outcomes through the spectrum of a monetary-driven decision-making.</abstract>

Brexit and new perspectives of an unconventional way of Eurozone revival

<abstract xmlns="http://www.w3.org/1999/xhtml">This paper analyses state aid, as a type of measure for intervention in the economy, which should aim to improve competition in market. State aid was analysed in terms of its volume and structure in the Republic of Serbia, as well as comparatively in some neighbouring countries from the region. Special attention was given to specifics of Serbian state aid in the context of the European Union accession, as well as to efficiency of the state aid and its impact on the national competitiveness. The main objective of the paper is to point out the necessity of state aid measures, especially in the case of developing countries, as well as the necessity of more efficient and effective use of state aid. Also, the paper will point out weaknesses that occur when decisions about provision and implementation of state aid are made, and to stress out the need to improve horizontal, sectoral and regional allocation of state aid in order to achieve positive effects on the competitiveness of economy in Serbia, Montenegro, and Bosnia and Herzegovina. Finally, the paper emphasizes the importance of building an efficient state aid control system in the process of fulfilling the pre-accession obligations of the observed countries in the EU accession process.</abstract>

Fund for Development of the Republic of Serbia,

Comparative Analysis of State Aid and Competitiveness of the Republic of Serbia and the Neighbouring Countries

<abstract xmlns="http://www.w3.org/1999/xhtml">This study employs the recently developed Lagrange multiplier-based causality-in-variance test by Hafner and Herwartz (2006), to determine the volatility spillovers between interest rates and stock returns for the US, the euro area, the UK, and Japan. The investigation pays careful attention to volatility transmissions between stock returns and interest rates before and after these economies reached the Zero Lower Bound (ZLB), which is permitted via the use of Shadow Short Rates (SSR), used as a proxy for monetary policy decisions. The results based on daily data imply that while bidirectional causality is observed, the volatility spillover from interest rates to stock markets are more prominent for the full-sample, as well as the sub-samples covering the pre- and during-ZLB periods.</abstract>

Volatility Spillovers between Interest Rates and Equity Markets of Developed Economies

<abstract xmlns="http://www.w3.org/1999/xhtml">The offerings of financial products to investors have evolved considerably over the last decades.This study was undertaken to understand the importance of financial products in Portugal for banks and private clients. Different financial products can provide to banks an important role on their revenues and liquidity. For clients allows to invest their savings according the risk, complexity and potential return they pretend be exposed. Financial products can be divided into four groups: deposits, investment funds, securities, and insurance banking. The six largest banks with Portuguese headquarters were identified based on an analysis of net asset value, and the products offered were analyzed. It was found that on an overall basis, the offerings of financial products available in banks are rather diverse and, at the same time, uniform. It was also noted that investment decisions are dependent on investors and that there are financial innovations that attract differentiated savings.</abstract>

Financial Products in Portugal

<abstract xmlns="http://www.w3.org/1999/xhtml">We analyse the determinants of the inflation trends in ten Southeast European (SEE) countries. Global cost-related factors and euro area inflation developments play an important role in explaining inflation dynamics in SEE countries. Changes in world food and energy prices, together with related changes in administered prices, similarly contribute to these trends. In general, we show that disinflationary spillovers from the euro area have been an important factor for fixed exchange rate regime countries, especially those with more trade exchange with countries in the euro area. Furthermore, our heterogeneity analysis shows that countries with less rigid exchange rate regimes but with relatively high exposure of trade exchange to the euro area (EA) market appear to be susceptible to inflation spillovers from the euro area. Moreover, nominal effective exchange rate plays an important role in inflation process in SEE countries, particularly in floating regime countries. In line with several recent findings about flattening of the Phillips curve in many economies across the world, cyclical unemployment does not appear to be significant in our sample. We conclude with some policy implications of our results.</abstract>

The Wharton School of the University of Pennsylvania

Disinflationary Spillovers from The Euro Area into the Countries of Southeastern Europe

<abstract xmlns="http://www.w3.org/1999/xhtml">Banking sector is important for various macroeconomic and microeconomic variables in terms of mobilization of funds, increasing savings, and providing alternative investment instruments suited to the every person by minimizing the risk of adverse selection and moral hazard, allocating funds to most productive projects, risk diversification. Therefore, sound functioning of the banking sector is critical especially for emerging and developing countries. This study explores the macroeconomic, institutional, and bank-specific factors behind nonperforming banking loans as an indicator of banking sector functioning in emerging market economies over the 2000-2013 period by employing the system GMM dynamic panel data estimator. Results of the dynamic panel regression analysis showed that economic growth, inflation, economic freedom (institutional development), return on assets and equity, regulatory capital to risk-weighted assets, and noninterest income to total income affected nonperforming loans negatively, while unemployment, public debt, credit growth, lagged values of nonperforming loans, cost to income ratio and financial crises affected nonperforming loans positively.</abstract>

Macroeconomic, Institutional and Bank-Specific Determinants of Non-Performing Loans in Emerging Market Economies: A Dynamic Panel Regression Analysis

<abstract xmlns="http://www.w3.org/1999/xhtml">The lack of portfolio granularity in terms of exposure has been shown to have important implications for the amount of a financial institution’s economic capital. Based on a numerical simulation model, we provide concrete examples of how granularity affects capital levels. We achieve this by following two simulation approaches, including a dynamic setup as a more realistic version of the analysis. We show that granularity has an indirect effect on the expected loss component. This could lead to significant changes in the competitive environment should banks consider adding a granularity adjustment to the estimated amount of capital and account for it in their pricing.</abstract>

Analysis of Granularity Adjustment for Regulatory Capital

<abstract xmlns="http://www.w3.org/1999/xhtml">The industrial sector of the Republic of Croatia is subject to deindustrialization, which was globally recognized as early as in the 1960s. Such a situation is a challenge in terms of implementing new sources of economic growth and industrial production, with a particular emphasis on investing in research and development, education and their products. Since 2011, special emphasis has been placed on the need to implement the concept of Industry 4.0. The problem surveyed in this research derives from insufficient readiness of the Republic of Croatia to implement Industry 4.0, mainly resulting from its major orientation towards traditional industrial sectors and a low share of high value added activities, which is particularly visible through the share of high technology products in total exports. However, the Republic of Croatia is characterized by low levels of scientific research and innovative activities, which greatly slows down this process. The aim of the conducted research is to present the theoretical aspects of the process of deindustrialization and Industry 4.0, to make projections of the key indicators of deindustrialization and Industry 4.0 until 2025, and to propose scientifically based measures to be taken in the direction of securing digital transformation of the Croatian industry. The purpose of the conducted research is to analyse trends in the industrial sector in the Republic of Croatia and to determine the current state of the (de)industrialization process and the level of implementation of Industry 4.0.The research has showed that the process of deindustrialization in the Republic of Croatia is characterized by a reduction in the share of employment in the primary sector, by a growing employment in the secondary sector, and by a relative increase in industrial production and labour productivity. However, since 2015 there has been an increase in employment in the secondary sector, which is in contrast to the theoretical concepts of deindustrialization and indicates a new trend in the industrial sector. This situation is a challenge concerning the implementation of Industry 4.0, which requires increased investment in research and development and the improvement of knowledge and the ability of the population and their implementation in the economic sector. By analysing this segment of the Croatian economy, some progress has been made. Also, it has also been found that in some segments it significantly lags behind the EU levels.</abstract>

Deindustrialization and Implementation of Industry 4.0 - Case of The Republic of Croatia

<abstract xmlns="http://www.w3.org/1999/xhtml">The banking sector is a complex system composed of a large number of stakeholders that interacts in a non-simple way continuously and which plays the key role in economic development of each country. The economies of developing countries like Albania are characterized by high demand for credit due to increasing investment. The revenues are even higher when the risk is greater. Of the high related risk, crediting leads to high returns. Credit risk is one of the most important types of risk in the banking sector that affect the bank performance, as it exhibits loss probability because of the failure of debtor to fulfill its obligations to bank. In June 2016, the level of non-performing loans in Albania appears in 24.4% of total loans, representing the major obstacle to the development and performance of the banking sector in Albania.The purpose of the estimable model outlined in this section is to capture the effects of macroeconomic, bank specific factors and Herfindahl-Hirschmann index (HHI) in the industry of bank performance. We also include a range of bank-specific variables that have been used in previous empirical studies that examine drivers of bank performance. A recent decline in revenue was observed due to higher provisioning expenses, which reduce banks’ profits. To identify factors affecting bank profitability, we have got to study those factors like bank-specific (internal) factors, industry specific and macroeconomic (external) factors. The internal factors that influence profitability are expressed in terms of efficiency, productivity, competition, concentration, soundness, safety and profitability. Industry specific factor is market concentration, while macroeconomic factors are Gross Domestic Product (GDP), Inflation Rate, and Real effective exchange rate (REER). In this paper, we will test whether lending decisions of all banks operating in Albania exhibit moral hazard. The study carried out an empirical investigation of the quantitative effect of credit risk on the performance of 16 commercial banks in Albania organized quarterly over the period of 14 years (2002-2015).</abstract>

Commercial Bank Performance and Credit Risk in Albania

<abstract xmlns="http://www.w3.org/1999/xhtml">This paper provides an insight into the behaviour of the liability side of bank balance sheet in response to explicit deposit insurance. It is an empirical investigation into the choice of a rational bank maximizing its bank value in terms of deposit and non-deposit liabilities after the implementation of explicit deposit insurance. The paper tests how banks' liabilities are affected because of the safety net and its design. Banks lower their leverage ratio as a response to the explicit deposit insurance. The paper finds evidence of depositor shifting funds between the types of deposits in the bank as a result of the explicit deposit insurance. It provides evidence of the importance of setting the right coverage in order to prevent the adverse effects that deposit insurance induces. It studies how the safety net design features affect the bank liability structure. The study finds that besides the explicit deposit insurance, the bank liability structure is affected by factors like tax expense, bank size, overheads, and dividend payout.</abstract>

An Empirical Investigation into the Effect of Explicit Deposit Insurance and Design on the Liability Structure of Banks

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Journal of Central Banking Theory and Practice

 The Journal of Central Banking Theory and Practice is a scientific and professional journal that the Central Bank of Montenegro publishes thrice a year. The journal has been published since 2012. The most stringent international standards are followed in the publication of papers and reviews which imply "double-blind" review.Journal of Central Banking Theory and Practice is a scientific journal dedicated to publishing quality papers and disseminating original, relevant and applicable economic research. Scientific and professional papers that are published in the Journal of Central Banking Theory and Practice cover theoretical and practical aspects of central banking, monetary policy, including the supervision issues, as well as banking and management in central banks.The purpose of the journal is to educate the general public about the key issues that the central bankers globally face, as well as about contemporary research and achievements in the field of central banking theory and practice.  Archiving  Sciendo archives the contents of this journal in Portico - digital long-term preservation service of scholarly books, journals and collections.  Plagiarism Policy  The editorial board is participating in a growing community of Similarity Check System's users in order to ensure that the content published is original and trustworthy. Similarity Check is a medium that allows for comprehensive manuscripts screening, aimed to eliminate plagiarism and provide a high standard and quality peer-review process. 