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As a socially, politically, and economically complex community, the Kingdom of Serbs, Croats, and Slovenes faced numerous financial difficulties. In order to enable the state to function smoothly, revive and develop economic activities, and allow citizens to meet their daily needs, it was necessary to establish a unified financial system. The elements of this system, particularly the establishment (or redefinition) of a central bank, expanding its network by incorporating branches of the Austro-Hungarian Bank to facilitate payment transactions, controlling the kronen and replacing them with new national currency, and implementing measures to stabilize the dinar, will be examined by the authors through the analysis of literature and primary archival sources.

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Copyright of Reforma (1694-5158) is the property of Kyrgyz-Turkish Manas University and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper analyses the operations of the National Bank at the beginning of the World War One when Serbia was still free. The National Bank was subjected to unfavorable legislation at the beginning of the World War One and this has prevented its normal functioning and greater contribution to the war efforts. Major difficulties were caused by limited money contingent and debt moratorium, which practically made impossible to finance economy, banks and the population. For this reason the Bank was formally transformed into an exchange office of governmental foreign currency, and basically into a printing press for inflationary money for the needs of the State. This was undoubtedly useful duty in the wartime, but with negative consequences. The restricted operations of the National Bank, as well as related measures (suspension of convertibility, the ban of food and gold export, price control), in conjunction with an ongoing war effort, contributed to the great economic crisis in 1915. Rigorous measures made sense in the short run at the beginning of the war and they were imposed because „it was general belief (in Serbia) that war cannot last long, because of high cash needs and huge military movements“ according to the report of Finance Ministry of 1925. However, these measures were maintained for too long, causing negative effects on economic affairs. It is not clear why they were not changed sooner. The Finance Minister Paču clearly saw the problems but, already sick and near the end of his life, may not have had the energy to convince the Prime Minister Pašić who was occupied with important military and political issues.The National Bank did not play particularly positive role in the World War One. The Government was mostly responsible for this because it did not allow necessary changes of the National Bank’s regulation on the eve of and during the war and also for implementing the problematic package of economic and financial policies during the war.

During the global financial crisis, the normalization of monetary circulation is one of the necessary conditions for overcoming the stagnation of the national economy. In this connection it is of great interest to study the experience of the monetary reform.