Cost efficiency of the banking industry and unilateral euroisation: A stochastic frontier approach in Serbia and Montenegro

This paper aims at investigating the differences in cost efficiency of the banking industry in Serbia and Montenegro over the period 2005–2012. These two countries operated under a common monetary regime until 1999 and followed two different monetary regimes thereafter: unilateral euroisation in Montenegro and monetary independence in Serbia. A stochastic frontier approach incorporating bank-specific and country-related variables is used to analyze cost efficiency in the banking sectors of Serbia and Montenegro. The analysis shows that a bank operating at given conditions in terms of ownership, market and other specific characteristics presents significantly higher cost efficiency if it operates in Montenegro rather than in Serbia. We argue that this result may relate to the choice of unilateral euroisation made by Montenegro. It is also shown that foreign-owned banks, higher capitalized banks and banks with lower non-performing loans operate at higher cost efficiency.     

Financial Market of Montenegro： Evidence of Crisis and Beyond

The financial sector has played a small role in the restructuring of the manufacturing sector in transition economies, and in some cases, financial liberalization may have undermined real sector development. However, stable and stimulating business environment is crucial for economic development. The aim of this paper is to show the main changes that have been implemented in Montenegro so far, and guidelines for changes in the financial market in Montenegro, for further harmonization in accordance with the requirements of European Union （EU） accession. Also, the ability of governments of transition economies to enforce contracts and to achieve fiscal and monetary responsibility is of great importance for economic and financial development. By adopting the new Constitution of Montenegro, in the field of regulation of the financial system, there have been significant changes, recognizing the Central Bank as an institution responsible for financial stability. The authors will give a review of the actual state of the financial market in Montenegro, as well as recommendations for further changes in order to create a favorable climate for entrepreneurship and to strengthen the overall financial system.     

Branding Post-Conflict Destinations

SUMMARY

This paper examines the challenges and opportunities of promoting Montenegro as a destination for sustainable tourism in the post-civil war era of the former Yugoslavia, given the country's unique status as the world's only self-proclaimed “ecological state.” There is no denying the recent history of ethnic violence and turmoil that divided the Balkans in the 1990s. Consequently, the incremental return of foreign and domestic visitors to Montenegro, as well as Serbia, Croatia, Slovenia, Macedonia, and Bosnia-Herzegovina, represents a significant return to stability almost ten years after the fighting stopped. And the particular interest of many tourists in the biology and cultural geography of the region makes clear the potential usefulness of “green” branding for Montenegro to distinguish itself from its competitors in the Mediterranean, and to resurrect the country's political image and visitor appeal through targeted environmental practices and promotions.

The ability to embellish its “eco” credentials and image through complementary partnerships and policies that sustain both tourism and the nation's economy would allow Montenegro to strategically and successfully position itself in the Adriatic travel market over the long term. Collaborative management and branding of World Heritage sites and transboundary parks for sustainable tourism will also enable Montenegro, and its former allies and foes, to restore the social and biological integrity and connectivity of a shared landscape severely degraded by a decade of war. In this manner, tourism can be a critical catalyst in overcoming the negative imagery and distrust which still impedes the Balkans' ability to achieve greater political integration and prosperity in an increasingly unified Europe.     

Wage differentials and state‐private sector employment choice in Yugoslavia*

In this study we use the newly available Yugoslavian Labor Force Survey data to investigate wage differentials and employment decisions in the state and private sectors in Yugoslavia. For the analysis we use three empirical models that rely on different statistical assumptions. We extend the standard switching regression model to allow non‐normality in the joint distribution of the error terms. After correcting for the sector selection bias and controlling for workers’ characteristics we find a private sector wage advantage. The wage premium is largest for workers with low education levels and declining for workers with higher educational levels. Given the regulatory and tax policies that pushed the private sector into the informal sphere of the economy during the period covered by our data, we argue that the state/private wage gap is likely to grow in the future. This will make it increasingly difficult for the state sector to attract and retain highly skilled employees.