The NBS Head Office Building was built from 1888 – 1890, on the basis of blueprints designed by Konstantin Jovanovic (Vienna 1849 – Zurich 1923), son to distinguished artist Anastas Jovanovic...
Seeking to make its research work more available to the broader public, but also to make a contribution to discussion within the academic and wider community, the National Bank of Serbia is publishing its Working Papers Bulletin. The Working Papers Bulletin features working papers – predominantly by our staff, analysing the causal links in the economy, factors affecting key economic indicators, and numerous other topics relevant for the functioning of a central bank and the financial system at large.
Abstract: In this paper we showed how labour market factors are included in the macroeconomic model which the National Bank of Serbia uses for the medium-term inflation projection, thus enabling an insight into labour market trends, as well as an analysis of the link with other macroeconomic indicators, notably their effect on inflation. The estimates obtained by applying the Kalman filter indicate that NAIRU is still below the unemployment rate, suggesting a positive unemployment gap and showing that the labour market in Serbia is not exerting any major pressures on inflation. The paper also presents the results of testing the relevance of the hysteresis effect in the unemployment rate for Serbia. The hysteresis effect was confirmed by applying the unit root test and estimating the statistical significance of the stochastic trend in the NAIRU series.
Key words: labour market, inflation, NAIRU, monetary policy
JEL Code: C53, E17, Е58
Abstract: The goal of this paper is to analyse the concepts of open banking and open finance as data sharing models in banking and financial industry. A key idea behind these concepts is to enhance competition among payment service providers, ensure greater transparency of their work, expand the range of choices for consumers and, most of all, add value for the final consumer by improving the quality and reducing the price of services. In Europe, service providers from several European Union countries (Germany, the Netherlands, and Sweden – Sofortüberweisung, iDeal and Trustly) became the key drivers of data sharing models, prompting the European Union to regulate this new type of payment services in order to improve competition in the payment services market and ensure better consumer protection. The Payment Services Directive 2 (PSD2) 2015/2366 was thus adopted, requiring banks to allow access to customer information to all third-party providers such as payment institutions, e-money institutions, FinTech companies and other credit institutions, subject to customer’s consent. PSD2 recognises two new types of non-banking market participants – account information service providers (AISP) and payment initiation service providers (PISP). The paper combines the descriptive and comparative methods, as well as the case-study method, to give an outline of important data sharing regulations and models, and of the abovementioned payment service providers. The paper also looks into the experience of applying open banking and open finances in the United Kingdom and Brazil. The final section of the paper deals with institutional assumptions for developing the data sharing model in the Republic of Serbia. The current Law on Payment Services (RS Official Gazette, Nos 139/2014 and 44/2018) is largely harmonised with PSD2, as the original Payment Services Directive 2007/64 was fully transposed into the national legislation. Full harmonisation with PSD2 has been achieved through amendments to the Law on Payment Services (RS Official Gazette, No 64/2024) of 31 July 2024, which lay down measures to further enhance competition, innovation and the range of choices for the end-consumer. This Law will be applied as of 6 May 2025. Among other things, open banking will be introduced, as will the domestic equivalents to AISP and PISP participants.
Keywords: data, open banking, open finance, payment initiation, account information, Law on Payment Services
JEL Code: E42, G15, G21, G28
Abstract: The paper examines Serbia’s absolute and relative indicators relating to FDI flows and goods exports. Serbia has come a long way from politically and economically isolated to an open country, comparable with other countries of similar size and development level, as confirmed by the calculated relative indicators. Based on the past tendencies, in the future we can also expect Serbia’s indicators to be above-average in case of direct investments inflow and goods exports relative to global indicators.
Keywords: FDIs, goods exports, global indicators, globalisation
JEL Code: F40, F41.
Abstract: The paper elaborates on machine and deep learning methods, as well as mixed data sampling regression models, used for GDP nowcasting. The aim is to select an adequate model that shows better performance on the data used. The paper provides an answer to the question of whether the use of deep learning methods can improve GDP nowcasting compared to traditional econometric methods, as well as whether the use of specific high-frequency indicators improves the quality of the models used. The paper examines the selection of adequate indicators – both official and those from alternative sources, presents the framework of mixed data sampling regression models and deep learning models used for nowcasting, and gives an assessment of two such models on the example of Serbian GDP. Serbia’s GDP was modelled for the period Q1 2016 – Q2 2023 and the end of the observed period (six quarters) was used for the forecast. Finally, two assessed models were compared – the mixed data sampling regression model and the LSTM neural network. A special focus is placed on ways to improve both models. The LSTM recurrent neural network model had a smaller forecast error, with the use of a combination of official and alternative (high-frequency) indicators, but the mixed data sampling regression model also proved to be a good tool for decision-makers, since its structure allows insight into the ongoing movements impacting GDP dynamics. The use of alternative indicators in nowcasting improved the projections through both presented models.
Keywords: GDP, nowcasting, MIDAS, neural networks, high-frequency indicators
JEL Code: C32, C45, C53
Abstract: The frequency of certain topics in newspaper articles can be a good indicator of some economic developments. The application of topic modelling in the Serbian language, using the LDA model, is hampered by the fact that Serbian is a highly inflectional language, where words have a large number of forms which the model recognises as words with a different meaning. In this paper, we tried to turn that aggravating circumstance into an advantage by reducing only the economic words to their base form. Thus, we attributed to them a greater relevance than to non-economic words, which remained in a large number of forms with a lower frequency of occurrence. As the topics classified in this manner were mostly based on economic expressions, it was expected that they would have a greater applicability in further economic analyses.
Keywords: textual analysis, topic modelling, Latent Dirichlet Allocation, LASSO model
JEL Code: C13, C55, E31, E37, E52
Abstract: The paper aims to analyse the projects of payment systems migration from the current ISO 15022 to the new ISO 20022 standard globally and in Serbia. One of the main project objectives is to facilitate cross-border payments, still largely characterised by high costs, low speed and insufficient transparency. This objective has been acknowledged globally as testified by the G20 roadmap designed in October 2020. National central banks are implementing their own migration projects based on keeping up with good practices and operating in accordance with the most up-to-date standards. The National Bank of Serbia also aims to achieve the compatibility required for potential connection with other payment systems (e.g. TARGET services of the European Central Bank) and connection to the SEPA geographical scope. New electronic messages are up to three times larger and structured in a way to offer greater flexibility, accommodation to economic conjuncture and complex requirements of AML/CFT, KYC, fraud prevention regulations, and the possibility for an almost one hundred percent straight-through processing rate. The analysis combines descriptive, comparative and case study methods to present in detail the characteristics of payments systems as the fundamental public infrastructure, payment trends, as well as the phenomenon of the electronic messaging standard and the XML pattern as the syntactic basis of the ISO 20022 standard. The paper also looks into the experiences of international payment systems and their operators, migration methods in the SWIFT network, as well as the work of the SWIFT central service for translation of МТ and МХ messages. Potential characteristics of the future software platform of the National Bank of Serbia for the NBS RTGS and NBS Clearing payment systems are also discussed in the paper. Payment systems migration will be completed in November 2025. As for the SWIFT network, the coexistence period started in March 2023 when messaging was possible under both standards. The NBS, as the operator of the payment systems which will switch to the new messaging format, will enable the coexistence of two messaging formats until the end of 2024 as one of the measures for ensuring the continuity of their work.
Key words: migration, ISO 20022 standard, electronic messages
JEL Code: Е42, Е58, F30, F33 и G20
Abstract: The aim of this paper is to examine the extent to which global factors – supply chain disruptions and rising oil prices – affect inflation in Serbia and other European countries, this being particularly important in the context of the ongoing episode of global inflation growth, which is largely a consequence of the outbreak of the Covid-19 pandemic, but also of the energy crisis and the conflict in Ukraine. The analysis was carried out using the panel method, whereby an estimation was made for 31 European countries considered together and separately for European advanced and emerging economies. The analysis was carried out for the period from Q1 2006 to Q2 2023 using the panel ARDL model and estimates were obtained using the PMG and DFE methods, as well as the asymmetric ARDL model, where the inflationary impact of the rise and fall in global energy prices and of the tightening and easing of supply bottlenecks was tested
separately. The obtained results suggest that global supply chain disruptions have a statistically significant effect on consumer and producer prices in the long term, and global oil prices in both the short and long term (controlled for the influence of domestic factors). The link between inflation and supply bottlenecks has been confirmed for both advanced and emerging economies, as well as by various disruption indicators (the European Commission’s Business Climate Indicator, measuring the level of disruption specific to a country, and the Fed’s Global Supply Chain Pressure Index, gauging the intensity of global pressures), which indicates the robustness of the obtained estimates. When the asymmetric ARDL model is applied, a higher coefficient is obtained for the indicator of global supply chain disruptions (measured by GSCPI) when a negative shock occurs (their loosening) than in the case of a positive shock (tightening), which is a consequence of the significant drop in this indicator in the last three quarters of the period analysed. This suggests that the obtained result is not robust in relation to the period analysed, which is why, before drawing final conclusions regarding this part of the analysis, the model should be re-evaluated once data for a few more quarters become available.
Keywords: inflation, global supply chain disruptions, energy, panel
JEL Code: C32, C33, E43
Abstract: The paper looks into the impact of the concentration of residents and non-residents’ FX supply and demand on the total amount of FX supply and demand of these banking clients. Our intention was to identify any trends and correlations with other market indicators in the observed ten-year period. For the purpose of studying the concentration of FX supply and demand, we used the Herfindahl-Hirschman index which has been proven to be a statistically significant regressor when explaining movements in net FX demand by residents and non-residents. The results showed the presence of a multi-year positive trend of decrease in the concentration of FX supply, i.e. diversification of FX sources, driven by dynamic growth in the number of residents supplying FX. On the other hand, there are multiple indicators suggesting that our FX market is still characterised by relatively low liquidity. However, during the period of structural appreciation pressures, namely in 2017, there was a noticeable gradual increase in the FX supply capacity to “absorb” FX demand on days when demand was more concentrated, which reflects the increase in the number of residents supplying FX and the diversification of FX sources.
Keywords: concentration of FX supply and demand, Herfindahl-Hirschman index, diversification of FX sources
JEL Code: C20, F31
Abstract: Prevention of money laundering and other abuses in the digital assets sector is a major step in the preservation of financial system stability. Non-alignment of regulatory regimes in an environment of rapid market development creates a potential for abuse and illicit activities. Monitoring the market requires systematic analysis in order to define clear guidelines for mitigating identified risks. Regular implementation of risk assessment and the regulator’s supervisory function facilitate the identification of the riskiness of the entire digital assets sector. In addition to an overview of regulations and standards governing the prevention of money laundering, the paper looks into the risks to which the digital assets sector is exposed, including the conduct of supervision and, in this sense, implementation of the risk-based approach.
Key words: regulation, digital assets, virtual currency, supervision, money laundering, abuse
JEL Code: Е30, К20, К23, 010, G18
Abstract: The paper presents the methodology which the National Bank of Serbia uses to nowcast inflation in real time, based on prices from the web, downloaded automatically using web scraping. A specific feature of the method used by the National Bank of Serbia is that it is based not only on prices for online shopping, but on every relevant data on the prices, including those displayed on the web merely informatively. The intention of the NBS was to cover as many items in the CPI as possible (around 90% at the time of writing this paper), in an endeavour to acquire a more reliable nowcast of the inflation central tendency. In the first year of applying this method, nowcasting performance has been encouraging – on average, inflation nowcasts were at the level of the official figures (nowcasts are not biased), the mean forecasting absolute error was 0.20 pp, and the median was 0.13 pp, which is not significant given that the observed period was characterized by relatively high and volatile inflation.
Keywords: inflation forecasting, web prices, web scraping, big data
JEL Code: C53, E17, E58
Abstract: The technology balance of payments represents a statistical overview of international market transactions between residents and non-residents, resulting from technology transfers realised through intangible assets (patents, licenses, knowhow, etc.) and the provision of services with a dominant technological component (research and development, technical assistance, engineering services, etc.). It is based on balance of payments and international trade in services statistics, in accordance with the international statistical standards. In this paper, the authors developed and examined the technology balance of payments of the Republic of Serbia, in order to determine the basic trends of technology trade with foreign countries and observe the analytical value of the technology balance of payments as an indicator of international technology trade.
Key words: inflation technology balance of payments, technology transfer, balance of payments, services account
JEL Code: F14, O33, О34, L84, L86
Abstract: After the global financial crisis of 2008, i.e. the collapse of Lehman Brothers, bankruptcy prevention has gained importance. Also, since the costs of preventing a crisis are almost always lower than the costs of resolving its consequences, this paper aims to look at models for assessing bank solvency. A precondition for applying the model is good quality input data, taken from financial and regulatory reports by banks. The models that are discussed more closely in the paper have come a long way, beginning with financial soundness indicators and continuing with the development of the S-scorе model and later stress testing, while over the past decades there has been an increasing focus on the use of artificial neuron networks. The practical part of the paper includes an analysis of the results obtained by applying the S-score model on data of systemically important banks in the Republic of Serbia. The analysis confirmed the strong financial position of these banks, even against the backdrop of uncertainty caused by the coronavirus pandemic.
Key words: financial reports, regulatory reports, financial soundness indicators, S-scorе model, stress testing
JEL Code: G01, G17, G21
In a modified form, the paper is based on a Master thesis defended in March 2022 at the Faculty of Economics in Belgrade.
Abstract: In this paper we present structural changes to the macroeconomic model used in the National Bank of Serbia for medium-term inflation forecasting, made in the period since inflation targeting was first introduced as the monetary policy regime. We describe in detail three changes related to inflation determinants. The first change has to do with the aggregation of overall inflation components, with the goal of linking them more directly to the underlying factors driving inflation. The second change is an extension of the model to explicitly include the effect of private sector wages on inflation. The third change is the inclusion of the effect of fiscal policy on aggregate demand, which has increased in significance in the period since the breakout of the COVID-19 pandemic in 2020. From the perspective of a reduced forecast error, the changes are justified by
performing historical simulations.
Keywords: inflation, model, prices, labour market, wages, fiscal impulse
JEL Code: C53, E17, E58
Abstract: In this paper we present the results of a dictionary-based text analysis of articles from the economic sections of four Serbian daily newspapers, caried out to estimate if those articles contain useful information for assessing inflationary pressures. We analyzed 117,113 economic articles in total for the period 2007–2022, by counting terms related to inflation and price rises and price falls, or counting texts containing those terms. Measures of newspaper inflation sentiment, obtained in this way, were found to be highly correlated with inflation, mainly driven by the periods of large inflation swings. During the period of stable inflation, the correlation is significantly lower. Causal relationship clearly goes from the newspaper inflation sentiment to inflation, and simple inflation models with the sentiment as an explanatory variable beat benchmark AR model in the out-ofsample forecast. We conclude that newspaper inflation sentiment can be used as an indicator of inflationary pressures, especially during periods of high inflation volatility.
Key words: inflation forecasting, text analysis.
JEL Code: C13, C55, Е31, Е37, Е52
Abstract: The subject of this paper are euro denominated green bonds issued by European governments. The aim is to determine the impact that: (1) volatility index of S&P 500 index – VIX, (2) six-month EURIBOR, (3) remaining maturity of the bond, (4) issuer’s credit rating and (5) absence of an independent external opinion on compliance of the green bond framework with the Green Bond Principles have on green bond yields, as well as whether yields of these bonds provide premium called greenium. Panel regression results show that higher values of volatility index VIX, 6M EURIBOR, a longer remaining maturity of the bond and the absence of an independent external opinion on compliance of the green bond framework with the Green Bond Principles lead to an increase in green bond yields, while a higher credit rating allows for a lower required yield. Additionally, a comparison of green and conventional bonds does not show the existence of a greenium.
Key words: green bonds, greenium, sustainability
JEL Codе: G10, C10, C21, C22, C23
Abstract: Technological advances over the past decades were conducive to the payments industry and exerted a significant impact on its trends. Today, payment service providers offer a wide range of payment instruments, applications and services and all these elements often rely on information technologies. Owing to the development of these solutions by the payments industry and their acceptance by users, the processes of payment service digitalisation and digitisation unfold. To track these processes as much as possible, this paper proposes a method for the analysis of payment transactions in Serbia, which captures all the elements relevant for the digital payments industry in our country. The result of the proposed analysis method is Serbia’s Digital Payments Index (DPI), which gives a new dimension to monitoring the evolution of payment transactions, specifically in the digital segment. The DPI is an index that shows the evolution of the use of digital payments in Serbia over time. It is based on five pillars. Digital payments trends in Serbia are in sync with global trends and the most state-of-the-art payment methods are on offer. When it comes to the use of cards and e- and m- banking channels, the number of users and transactions are on the rise, making a significant and steady upward pressure on the DPI in recent years, which means that the spread of digital payments in Serbia increases year after year.
Keywords: payments, digitalisation, development, payment services, NBS, cards, mobile phones, DPI, COVID-19, statistical reporting, Serbia
JEL Code: C43, C80, E42, E58
Abstract: International convergence and standardisation of general banking terms and conditions are primarily associated with the Basel Committee’s activities, which resulted in the adoption of the Capital Adequacy Accords (Basel I, Basel II and Basel III) for the purpose of limiting potentially growing risks in the international banking operations by means of appropriate capitalisation. The purpose of this paper is to point out the importance of the Basel Accords and/or their impact on banking operations and financial stability based on available scientific literature, international standards, the EU acquis, national legislation and other statistical data. Starting from a defined subject matter and a set goal, the paper will first analyse the core principles of Basel I and the transition to the new Basel II Accord. After identifying the shortcomings of Basel II, which were manifested during the global financial crisis, the attention will be focused on the development and implementation of Basel III. Taking into consideration the preservation of financial stability, the National Bank of Serbia pays special attention to improving and harmonising the legislation governing banking operations in accordance with international standards and the EU acquis, while observing distinctive features of the local legal framework and the national market.
Keywords: Basel Committee on Banking Supervision, capital adequacy ratio, financial stability, Basel I, Basel II, Basel III, capital buffers
JEL Code: G01, G21, G38, O11
This paper is based on a master thesis defended in June 2022 at the Faculty of Law in Priština, temporarily located in Kosovska Mitrovica.
Abstract: To test the extent to which global and domestic factors have impacted the inflation dynamics in Serbia in the past fifteen years, we have applied three approaches in this paper: 1. the principal component analysis, which allowed us to separate the contribution of global and domestic factors to y-o-y inflation; 2. the estimate of the ARDL model to examine the impact of concrete domestic and global factors on the quarterly inflation rate; 3. the estimate of the SVAR model, based on which we followed the inflation’s response to different shocks from the domestic and international environment. The econometric analysis of the impact of global and domestic factors on inflation in Serbia shows the statistical significance of coefficients for the exchange rate and inflation expectations, indicating the importance of the relative stability of the exchange rate and anchored inflation expectations for domestic inflation. In the period observed, inflation was influenced both by global shocks (rising global primary commodity prices) and domestic factors (dinar’s depreciation against the euro). Their influence is different in subperiods. Since the start of 2017, the exchange rate diminished the variability of inflation, while inflation’s rise since 2021 is led primarily by global factors.
Keywords: inflation, global factors, domestic factors, principal component analysis, structural VAR
JEL Code: C10, C5, Е31, Е37, Е52
Abstract: The paper explores cause-and-effect relationship between macroeconomic stability and private fixed investments in the 2001–2019 period in Central and Southeast European countries applying inflation targeting regime in their monetary policies. Change in the inflation rate, share of the current account deficit in GDP and change in the share of fiscal deficit in GDP are used to proxy macroeconomic stability. For the purpose of the analysis, a fixed effects panel model has been estimated, with simultaneous control for standard investment determinants (quality of institutions, external demand, relative price of capital goods, real interest rate, openness of the economy and financial market development). The results show that improved indicators of macroeconomic stability have a positive impact on the share of private fixed investments in GDP, boosting the outlook for economic growth. The estimated model confirms that both improved quality of institutions and other standard private investment determinants enhance the share of private fixed investments in GDP. The analysis also indicates robustness both when applying the fixed or random effects panel and different control variables.
Key words: private investments, inflation, current account deficit, fiscal deficit, quality of institutions, real interest rate, relative price of capital goods, external demand, openess of the economy, financial market development.
JEL Code: Е22, Е3, Е52, Е61
Abstract: Balance sheet data of the National Bank in 1884–1940 are analysed in the paper. Data were collected from the National Bank’s annual reports and were classified by financial instrument and sector. The annex to the paper contains a simplified version of the National Bank’s balance sheet as some accounts were aggregated to ensure better readability and clarity. Separate tables show more detailed data on loans to banks and corporates, capital, distribution of profit and net profit of the National Bank, and its reserve fund and other funds. To present the composition of some data in as detailed a manner as possible, such as, for instance, data on loans, it was necessary to carry out additional calculations based on available information from original sources and other publications. For the purposes of this paper, we carried out an analysis of the factors impacting the creation of liquidity (banknotes in circulation and bank and corporate deposits with the National Bank). To better understand the extent to which the National Bank adhered to statutory limitations concerning the circulation and maintenance of the coverage of banknotes, we calculated the regular supply of banknotes in 1898–1919 and the free supply in 1920–1930. We carried out additional calculations of the dinar exchange rate against some currencies in order to present the unit value of a foreign currency against the dinar in accordance with present-day standards. International developments and events with a direct or indirect impact on the National Bank’s balance sheet changes are mentioned several times in the paper.
Key words: reserves, loans, banknotes in circulation, currency, temporary exchange, interest rates, liquidity creation, gold.
JEL Code: C32, G01, E44
Abstract: The digital assets market has been growing in the last decade. Market development brings new opportunities for economic development at the national level. However, the wide acceptance of virtual currencies also creates the potential for money laundering, terrorist financing and other risks specific to this market. Hence the need for continuous market supervision and the establishment of an adequate regulatory framework which will above all contribute to greater legal certainty in dealing with virtual currencies. Although there is no unique approach in the world regarding the legal regulation of virtual currencies, a large number of countries has established a system of regulation, i.e. rules regarding licensing and supervision in this area. This paper first presents a brief analysis of the digital assets market. The analysis aims to consider the existing risks, as well as the volatility of virtual currency prices. In the continuation of the paper, a comparative legal study of laws and regulations governing the licensing and supervision of the digital assets market in the European Union, Japan, the United States and the Republic of Serbia is presented. The aim is to understand the need to define the regulatory framework and unique rules for the implementation of the licensing and supervision process by regulators.
Keywords: regulation, digital assets, virtual currencies, licence, supervision.
JEL Code: Е30, К20, К23
Abstract: The paper considers interest rate pass-through in Serbia, based on evidence from individual bank data. Analysis was conducted for the period from September 2010 to May 2021 using panel cointegration tests and estimates obtained by the fully modified ordinary least square method (FMOLS), dynamic ordinary least square method (DOLS), pooled mean group method (PMG) and mean group method (MG). Estimation results suggest that there is a significant long-run relationship between bank lending rates in national currency and rates in the domestic money market. Interest rate pass-through from money market to rates on dinar loans is complete for both corporate and household loans, whereas the reaction is stronger and faster in case of corporates, as they have more alternative sources of finance than households. Estimates obtained by the FMOLS, DOLS, PMG and MG methods are quite similar, indicating the robustness of the results. The pass-through estimation is also performed for the shorter period – September 2010 to end-2014, with results suggesting the interest rate channel gained more strength over time, thanks to the increasing interbank competition, higher economic growth, and more favorable macroeconomic prospects of the economy. Statistically significant impact of the risk premium measured by EMBI on dinar corporate loans is also confirmed. Given the fact that around two thirds of loans are FX-indexed, we have estimated the influence of 3M and 6M EURIBOR to rates on euro-indexed corporate and household loans. Long-run relationship and statistically significant impact of country risk premium on еuro-indexed interest rates is also confirmed, along with the high pass-through of EURIBOR. In addition, we tested whether interest rate pass-through is affected by some individual bank characteristics such as size, strength of deposit base, liquidity, quality of credit portfolio, capital position and the share of dinar loans in total loans.
Key words: interest rate pass-through, panel, monetary transmission mechanism.
JEL Code: C53, E17, E58
Abstract: We modify a DSGE model of a small open economy by adding financial euroization in order to capture the main channels of the monetary transmission mechanism in matching with the Serbian data. In contrast to the standard DSGE workhorse, the model encompasses commercial banks and foreign exchange-denominated deposits and loans. Given these features, the model is well-suited to evaluating effects of the nominal exchange rate on the financial wealth and consumption of households. The model structure, including optimization problems and first-order conditions, is provided in the paper. The model properties are tested to match the stylized facts of dollarized economies. Specifically, the model is calibrated to the Serbian data, and a model-consistent multivariate filter is used to identify unobserved trends and gaps.
Key words: DSGE model, financial dollarization.
JEL Code: E44, F41, F47.
At the time of writing this paper, Tibor Hlédik, Jiří Polanský, and Jan Vlček were working at the Czech National Bank, and Mirko Đukić and Ljubica Trajčev at the National Bank of Serbia.
Abstract: The purpose of this paper is to set up the Systemic Stress Indicator (SSI) of the Republic of Serbia’s financial system based on the proposed modification of the systemic stress testing approach that allows for a more appropriate aggregation of the observed indicators within the financial system segment. It also weighs up the advantages of the proposed approach compared to the aggregation methods most frequently used in literature. It proposes a mathematical formulation of the systemic risk level of the financial system and an analytical framework of the early warning system based on an assessment of the likelihood of a systemic crisis occurrence in case of an arbitrary number of regimes. The SSI has demonstrated the ability to correctly identify crisis periods and the systemic risk level of the Republic of Serbia’s financial system. It is suggested that probabilities of a systemic crisis occurrence in a given period are in perfect sync with the dynamics of undetected periods. An optimal period in the case of used indicators and relatively short time series is six months, which may provide timely signals to policy makers to mitigate negative effects on financial and macroeconomic stability.
Key words: Financial stability, Systemic risk, Financial crisis, Macro-financial linkages, Markov-switching model, early warning model
JEL Code: C32, G01, E44
Abstract: This paper presents the most important global development trends in payment card industry. The payment cards industry is specific because it has a high level of multidisciplinarity since, besides the technological, it also includes various other aspects such as the legal, market, financial, social and even political. Hence, development factors of payment cards are not always only technological in their nature but are often also of market, legal, financial, social and political kind. The aim of this paper is to present these very aspects of development in a simple and concise manner, as much as this is possible, given that because of the multidisciplinary nature, the topics associated with payment cards are often extremely complex and voluminous. At the end of the paper, we detail the situation in Serbia which boasts a very high level of monitoring and realisation of technological and legal solutions available in the world. In addition to presenting development trends in payment card industry, the paper also offers some of the author’s critical analysis of certain development trends in the sense of their advantages, shortcomings, problems in realisation and “lessons learned” from previous numerous experiences in the world.
Key words: payment cards, development trends, chip cards, EMV, CPA, contactless payments, e-commerce, PCI DSS, IFR, PSD2, NFC, HCE, strong authentication, 3-D Secure, SRC.
JEL Code: C32, G01, E44.
