Public Sector Economics - submission site

Assessing uncertainty and its effects on the public sector: Editors’ introduction to the thematic issue of Public Sector Economics

Petar Sorić, Mirjana Čižmešija — Fri, 13 Dec 2024 00:00:00 +0100

Editorial

Traditional or social media: which capture employment better?

Marija Hruška, Mirjana Čižmešija — Fri, 13 Dec 2024 00:00:00 +0100

Political discourse has the ability to spread either uncertainty or calm among the population. Economic upheavals of considerable magnitude can also spread ambiguity. Both newspaper articles and Twitter posts reflect important events that have the potential to increase or decrease uncertainty from a citizen’s perspective. We employ two measures of media uncertainty, one reflecting the uncertainty perceived by journalists and the other characterizing the uncertainty associated with Twitter users. More specifically, we use the Twitter Economic Uncertainty and the Economic Policy Uncertainty Index. To investigate which uncertainty source better captures employment variations, we apply a regression decision tree and linear regression. Our results speak in favour of the more traditional media uncertainty source. Linear regression outperforms the decision tree in both models. Namely, we find a statistically significant negative relationship between both uncertainty measures and employment, while controlling for other macroeconomic aspects.

Macroprudential policy stance assessment: the case of Croatia

Tihana Škrinjarić — Fri, 13 Dec 2024 00:00:00 +0100

This paper contributes to the literature on empirical macroprudential policy (MP) stance assessment. The main purpose of this framework is to evaluate the potential benefits and costs of MP tools and instruments that have been employed in a financial system. We focus on a country that has a fairly active macroprudential policy to establish the initial framework for assessing the effectiveness of macroprudential policy in Croatia. A quantile regression approach is used in order to evaluate the efficiency of the MP stance, on quarterly data ranging from the mid-1990s until 2022. It is shown that somewhat different results could have been obtained if a variable definition has been employed. Measurement of the MP stance is difficult, then, as it depends on the definition of the macroprudential policy variable, selection of other important variables in the analysis, as well as other methodological factors.

Uncertainty, populism and foreign direct investment: the state of play in economic research

Marijana Andrijić — Fri, 13 Dec 2024 00:00:00 +0100

This paper provides a synthesized, critical overview of the latest economic literature regarding the linkage between three concepts – uncertainty, populism and foreign direct investment. It starts with summarising ways to measure uncertainty in a direct and an indirect manner (with their respective advantages and limitations) and estimate its effects on populism and foreign direct investment. Later on, the paper focuses on the link between populism and foreign direct investment, exploring the possible role of uncertainty in this context. While heightened uncertainty and populism are typically associated with negative economic (including a decline in foreign direct investment) and non-economic outcomes, the nature of these effects and their interpretation are complex and leave room for further investigation. The implications of the research on this topic are wide reaching not only for economic stakeholders, but also for public sector policy practitioners.

Thriving amidst uncertainty: a financial blueprint for the public budget

Enkeleda Lulaj — Fri, 13 Dec 2024 00:00:00 +0100

This research explores strategies for thriving amidst uncertainty through a financial blueprint for public budgets, focusing on key factors like budgetary resilience (BR), stability (BS), sustainability (BSu), empowerment (BE), preparedness (BP), governance (BG), inclusion priorities (BIP), and agility (BA). Analysing data from 1,200 respondents and audited financial reports for 2023/24, statistical methods such as exploratory and confirmatory factorial analysis, and Cronbach’s Alpha were used to assess relationships among these factors. Results highlight BR’s role in economic development, while BS and BSu enhance financial stability and reduce debt. BE fosters employment and social stability, emphasizing robust planning. BP ensures accurate management in uncertain conditions, and BG reduces corruption and strengthens accountability. These insights offer valuable guidance for policymakers and financial managers aiming to enhance public budget stability and sustainability.

Central bank balance sheet and inflation in a euroised small open economy: a cointegrated SVAR analysis

Gent Sejko, Altin Tanku — Fri, 13 Dec 2024 00:00:00 +0100

The Bank of Albania has not employed traditional balance sheet policies; however, it has taken a series of policy actions that have increased the proportion of nonborrowed relative to borrowed components of the monetary base and its balance sheet liabilities. We aim to investigate whether these changes in the structure of the central bank balance sheet gave rise to additional monetary shocks with direct effects on inflation. The hypothesis is tested by estimating a small structural VAR model with cointegrated I(1) and I(0) policy and non-policy variables. We identify long-run restrictions based on the embedded structure of the data generating process, as defined by cointegration relationships. Our findings suggest that an increase in the share of non-borrowed components of the monetary base has direct and indirect positive effects on inflation. We argue that the identification of this monetary shock has significant implications for the central bank and its monetary policy.