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This paper analyses the effects of loan supply, as well as aggregate demand, aggregate supply and monetary policy shocks between 1998 and 2014 in Macedonia using a structural Vector Auto Regression with sign restrictions and Bayesian estimation. The main results indicate that loan supply shocks have no significant effect on loan volumes and lending rates, as well as on economic activity and prices. The effects of monetary policy on lending activity are fairly limited, although there is some evidence that it affects lending rates more than loan volumes. Monetary policy shocks have strong effects on inflation, while the central bank reacts strongly to adverse shocks hitting the economy. Baseline results are fairly robust to several extensions and robustness checks. According to historical decomposition, the lending activity was supporting economic growth before and during the crisis, but its contribution became negative during the recovery and it was a drag on growth until the end of the period. Pre-crisis GDP growth is mostly explained by the supportive interest rate of the main monetary policy instrument. However, the restrictive policy during the crisis for the purposes of maintaining monetary policy goals was associated with a fall in GDP, while the policy became supportive again during the early stages of the recovery. Policy rates in the recent years mostly reflect subdued lending activity and aggregate supply factors, which the central bank tries to counteract with a more accommodative policy.

This study investigates the cyclical character of fiscal policy in transition countries in Central, Eastern and Southeastern Europe (CESEE) in the period from 1995 to 2011, using system GMM as the preferred estimation method for the underlying sample and model specification. The study finds discretionary policy in the CESEE EU Member States and in the Western Balkan countries to have been procyclical, thus aggravating economic fluctuations, whereas automatic stabilizers moved overall policy to an acyclical stance. In addition, the analysis indicates considerable differences in the cyclical character of fiscal policy between transition countries and the Western European EU Member States, where both overall fiscal policy and discretionary policy were acyclical. Finally, the study also offers several recommendations for policymakers, particularly in transition countries.

This paper focuses on investigating the determinants of lending rates and interest rate spreads in Macedonia. In order to quantify the effect of various factors on lending rates and interest rate spreads during the 2001-2009 period, we use panel estimation techniques on a sample of commercial banks in Macedonia. Our results indicate that lending rates are mostly influenced by bank size and market share, and to a somewhat lesser extent by deposit rates and non-performing loans. In addition, policy variables such as the domestic policy rate and the foreign interest rate also appear to be quite important. Furthermore, bank size and market share, as well as the differential between domestic and foreign rates, are the most important factors affecting interest rate spreads, while the effect of other factors is less clear-cut.