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This paper analyses key macroeconomic repercussions of the global pandemic and geo-political crises in terms of growing recessionary and inflationary pressures, and finally, the potential occurrence of stagflation. The aim of this paper is to primarily analyse the stagflation shocks of the 70s, afterwards, compare them with the current crisis for the period January 2020 - July 2022 using the example of selected developed economies (USA, Germany and France). Using descriptive analysis, it was shown that in the observed period inflationary and recessionary pressures existed in USA, Germany and France. However, those pressures could not be identified as stagflation, since that were not present simultaneously. Namely, during the pandemic crisis, recessionary pressures were present, since then the GDP growth decreased till first quarter of 2021 in analysed economies, while inflation rates were stable. On the other hand, with the recovery of economies in the second quarter of 2021, inflationary pressures became stronger and intensified by geo-political crisis. Therefore, it seems that the most visible anomaly of the global economic system in 2022 is the presence of inflationary pressures.

After the global economic crisis, a broad consensus has emerged that membership in the Eurozone exerts a strong pressure on fiscal policy, since it is characterized by the dichotomy of common monetary policy and heterogeneous fiscal policies. This paper analyzes the performance of fiscal policies, highlighting the nexus between the public revenues and public expenditure from the angle of 19 Eurozone economies in the period 2010q1-2020q4. The research is based on Dumitrescu & Hurlin (2012) and Juodis, Karavias & Sarafidis (2021) Granger non-causality tests in macro panels in order to test causality direction, as well as Westerlund errorcorrection-based panel cointegration test to analyze fiscal sustainability. Having in mind the heterogeneity and divergency of the Eurozone members, sub-samples were estimated, concerning the core, the periphery and the emerging Eurozone economies. The results imply that all Eurozone economies achieve weak fiscal sustainability, while all economies from the group of Eurozone periphery applied "tax and spend" hypothesis. The empirical finding could be related to the fact that Eurozone periphery economies were hit harder by the global and sovereign debt crisis, and that implemented austerity and bail-out programs were adequate, thus resulting in sustainable fiscal position, reducing heterogeneity of fiscal performance within the Eurozone economies.

This paper analyses the effectiveness of bail-out mechanisms after the global crisis in comparison to Covid-19 pandemic crisis in the selected Eurozone economies. It seems that in the circumstances of global instability, laissez-faire rules in economy are not enough, meaning that government interventions are desirable and unavoidable. In the Eurozone, the implementation of bail-out programs is related with the problem of a new "impossible trinity" and no-bail out clause. However, the adopted clause on non-use of the bail-out mechanism has had to be ignored several times in the past, and those implementations of bail-outs are focus of this paper. The research is based on descriptive statistical analysis and fixed panel model specification using available data in relation to the bail-out programs in the period 2011-2020 in selected Eurozone economies. The research shows that governments appear to have learned at least three lessons from the global crisis in relation to the bail-out mechanisms: (a) the need for quick implementation of emergency measures, (b) the bail-out mechanism was effective in reducing the fiscal deficit, however, caused an increase in the public debt, and (c) strengthening the fiscal framework of the Eurozone economies by defining supranational fiscal rules remains the essence of a stronger Eurozone and the European Union.

The aim of this paper is to point out the limitations of conventional approaches, articulated via political processes, in reducing income inequality. Using the panel data methods, on the sample of 21 affluent OECD countries in the period from 1980 to 2011, it is observed that the increase in labour productivity as well as preferences of voters to parties that advocate greater redistribution, contrary to common perception, not necessarily lead to reduction in income inequality. Increasing dominance of big capital in the field of technological progress changes the conventions about contribution of workers to labour productivity. The result is a weakening of workers’ bargaining power in relation to employers as well as increase in gap between labour productivity growth and real wage growth, which both lead to increase in income inequality. In comparison with the other political parties, it seems that the right-wing parties are more efficient in using voters’ support to implement their concept of the welfare state, which contributes to maintaining the high market-generated income inequality. Such situation could be explained that de jure power of the government depends on election results, whereas de facto power depends on the support of so-called globally-oriented super elites. [Projekat Ministarstva nauke Republike Srbije, br. 47010]

In recent years, fiscal policy in the Eurozone (EZ) has faced challenges posed by the strong and rapid increase in inflation as a consequence of the COVID-19 pandemic and other geo-political crises. Due to the fear of "fiscal inflation" present during episodes of fiscal stimulus during the pandemic crisis, this paper assesses the relationship between discretionary fiscal policy and inflation in developed EZ economies, taking into consideration the rise in energy prices as a control variable. This study considers the econometric framework of heterogeneous, non-stationary panels (Pooled Mean Group (PMG) and Common Correlated Effects Mean Group (CCEMG) estimators). Using quarterly panel data for the period 2015q1–2024q1, the results show that, in the long run, the effects of fiscal policy on inflation are insignificant. However, covering only the pandemic and other geo-political crises (2020q1–2024q1), research shows a significant negative long-run relationship between fiscal expenditure and inflation and heterogeneous short-run fiscal adjustments due to the lack of a fiscal union in the EU economies. Hence, accompanied by monetary policy, the discretionary response of fiscal policy to inflationary shock was oriented in the same direction—the reduction in inflationary pressures during a geo-political crisis. Fiscal policy mitigated inflationary pressures in these recent crises, while in the long run, it did not affect nominal variables, indicating that there is no evidence of fiscal inflation in the sample of EZ economies during a stabilization period or under crisis conditions. [ABSTRACT FROM AUTHOR]

This paper examines key driving forces of inflationary pressures, taking into account supply and demand side determinants and actions of policy makers, during the pandemic and geopolitical crises in the Eurozone. Using heterogeneous nonstationary macro-panel models, especially the Mean Group (MG) and Pooled Mean Group (PMG) methods in the period 2020q1–2024q4, it is concluded that the dominant determination of inflationary pressures comes from the supply side. There is a long-run positive equilibrium relationship between the growth of energy prices and the growth of the consumer price index (CPI), and between the index representing supply bottlenecks (SBI) and the growth of CPI, while the relationship with the unemployment rate is insignificant. Also, the existence of a long-run equilibrium between the interest rate and CPI is homogeneous due to the unique monetary policy on a sample, and negative, indicating the efficiency of that policy. However, the speed of adjustment of individual economies is heterogeneous, and in the case of Greece and Ireland, insignificant. The heterogeneous or insignificant response of Eurozone member states, especially related to core-periphery asymmetry, refers to the vulnerability and structural weakness of the Eurozone economies, and the need for deeper integration. [ABSTRACT FROM AUTHOR]

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The global trends in taxation have generated a "race to the bottom" in capital income taxation, which is intended to be stopped by OECD through the introduction of a global minimum tax rate (15% of effective average tax rate—EATR). The question is whether the defined tax competition floor would have heterogeneous implications in different economies. The aim of this paper is to examine the long-term relationship between the EATR and FDI, and between the EATR and budget balance (BB) in European OECD economies in the period 1998–2021, using non-stationary, heterogeneous panels. According to the linear PMG model, a significant negative long-term relationship was revealed between the EATR and FDI and between the EATR and BB, while the error-correction parameters are significant and heterogeneous, showing that the speed of adjustments towards equilibrium is different across the analyzed economies. However, the nonlinear PMG results revealed asymmetry as the magnitude of the influence of an EATR reduction has a greater effect on FDI attraction and deficit deepening than an increase in the EATR on the opposite tendencies of FDI and deficit. Policymakers are facing a trade-off related to FDI attraction/budget deficit deepening when making decisions in relation to the EATR, and they are mostly oriented toward FDI inflow using EATR reduction in the analyzed economies. [ABSTRACT FROM AUTHOR]

The process of deepening the economic integration of European economies reached its peak with the formation of a supranational entity for conducting monetary policy. However, the high degree of financial integration of the market also implied the vulnerability of the economic union in terms of prompt reaction to external shocks with divergent effects. Oil price fluctuations are of essential importance for macroeconomic performance, which is particularly reflected in countries more dependent on the import of this raw material. This research aims to apostrophize the asymmetric effects of oil price fluctuations on the stock market indices on a sample of higher (Germany, Italy, France) vs. lower (Croatia, Bulgaria, Ireland) oil importers. The empirical findings are determined based on impulse response functions derived from the VAR model as well as the Granger causality test of the relationship between stock market indices and oil price fluctuations. In order to identify the isolated impact of oil price movements on stock market indices of selected European economies, the VAR (Vector AutoRegression) model is evaluated in the time period 2013M1-2023M1. The results of the research indicate an asymmetric mechanism of the impact of oil shocks on the financial markets of EU member states. [ABSTRACT FROM AUTHOR]

Due to the single market within the European Union (EU), capital mobility has created many challenges in the field of tax policy, especially whether taxes should be coordinated or governments should retain fiscal sovereignty for the sake of tax competitiveness. In order to attract foreign direct investment (FDI), emerging EU economies most often choose the policy of tax reduction and particularly lowering the effective average tax rates (EATR). The purpose of this paper is to empirically assess the impact of changes in the EATR on the decision to localize FDI in emerging EU economies in the period 1998–2021, in the framework of cross-sectional dependent, non-stationary, heterogeneous panels. Using the (Pooled) Mean Group estimator, the long-run relationship between the EATR and the FDI is revealed. The error-correction parameters are significant and heterogeneous, showing that the speed of adjustments towards equilibrium is different, but the highest in Estonia. Accession to the EU contributed faster adjustments to the long-run relationship in the majority of the emerging EU economies, while a broader set of potential determinants of FDI localization is taken into consideration and estimated using the Panel-corrected standard error method. Results showed de facto tax competitiveness in the group of emerging EU economies, instead of de jure tax coordination in the EU. [ABSTRACT FROM AUTHOR]

Copyright of Ekonomika is the property of Society of Economists 'Ekonomika' 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 empirically assesses heterogeneity of fiscal adjustments in the European Union and West Balkans economies, in the circumstances when debt crisis renewed the questions when and how governments adjust their public expenditure. The research covers sample of 28 European Union economies and 5 West Balkans economies over the period 1995-2018. The results based on PMG panel model point to weak fiscal sustainability with significant fiscal adjustments, in average 28.18% of deviations from equilibrium relationship are corrected in one year. Moreover, the research provides heterogeneous evidence of public expenditure adjustments to long-run equilibrium relationship in European Union and West Balkans economies. According to the results, candidates and potential candidates for European Union membership have improved their public finances, however, accession process does not lead to automatic convergence of these economies and fiscal sustainability assessment. [ABSTRACT FROM AUTHOR]

This paper assesses fiscal sustainability in 28 European Union economies in the period 1995-2018, using panel cointegration analysis for fiscal sustainability testing. The research is based on econometric framework of nonstationary, heterogeneous, and cross-sectional dependent panels, using robust Westerlund (2007) panel cointegration test, Mean Group, and Pooled Mean Group method of estimations. The results of cointegration analysis for EU-28 point to weak fiscal sustainability, with significant fiscal adjustment in average. However, heterogeneous coefficients show in which economies fiscal sustainability is achieved (whether it is strong or weak fiscal sustainability) and heterogeneous fiscal reactions. Robustness check confirmed existence of fiscal sustainability with heterogeneous fiscal adjustments in European Union economies, and indicated strong fiscal sustainability in the shorter period of time, namely after 1997 when Stability and Growth Pact is introduced. [ABSTRACT FROM AUTHOR]