This paper examines the relationship between stock market development and economic growth in the Republic of Serbia in the period 2002Q1-2018Q4. In order to incorporate the important aspects of stock market development, the market capitalisation ratio is used as the indicator of the size, the total value ratio and the turnover ratio as the liquidity indicators, while the growth rate of the real GDP is used as the indicator of economic growth. The analysis is carried out within the Vector Autoregressive model, using the Toda-Yamamoto-Dolado-Lütkepohl approach to the Granger causality test, the impulse response function, and forecast error variance decomposition. This study reveals the unidirectional Granger causality, running from stock market development to economic growth. The impulse response function shows the positive response of economic growth to an unexpected stock market shock size, while liquidity shocks lead to alternate positive and negative responses to the economic growth rate in the short term. The variance decomposition analysis indicates that fluctuations in the economic growth rate are largely explained by the shocks of the market capitalisation ratio. From the findings, it is concluded that policy-makers should focus on a stock market promotion strategy to enhance economic growth in the Republic of Serbia.

Prague Economic Papers - impact factor journal of the University of Economics, Prague

The main goal of the research in this paper is to, starting from the role that financial system has in operating of every market economy, analyze the strengths and failures of a bank-based and market-based financial system when performing basic economic functions. In order to achieve the defined goal, a qualitative research was conducted. In this sense, an innovative interpretation of the relevant scientific literature was made using descriptive and comparative analysis methods. The paper examines four approaches that represent a critical analysis of the role and importance of banks and the securities market - bankbased, market-based, financial services and legal-based approach. Emphasizing the positive role of banks, the bank-based approach highlights the comparative failures of the securities market. On the other hand, the market-based view highlights the advantages of the securities market, while at the same time emphasizing the failures of banks in performing their basic functions. However, the focus of a financial services approach is not the debate over whether a better financial system is based on banks or the securities market, but the extent, quality and availability of financial services is important. Finally, the legal-based approach, which represents addition to the financial services approach, emphasizes compliance with the provisions of financial contracts and the protection of the rights of participants in financial transactions. Accordingly, the key research findings relate to identifying assumptions that contribute to the better functioning of the financial system and to pointing out that the functional compatibility of banks and securities markets contributes to their complementarity and more efficient transfer of funds from savings towards investment entities.

The subject matter of the research study conducted in this paper is the interactive relationship between banks' credit activity and economic growth. In connection with that, the paper is aimed at examining the existence and direction of the cause and effect relationship between the credit activity of the banking sector and the overall economic activity in the Republic of Serbia. The quarterly data related to the period from 2003 to 2019 were collected for the purposes of the research. The share of the loans granted to enterprises in the GDP and the share of the loans granted to households in the GDP are used as the indicators of the credit activity in the study, whereas the real GDP growth rate is determined as the indicator of economic growth. Given the fact that the observed time series are of the different order of integration, the analysis is conducted within the VAR model by applying the Toda-Yamamoto procedure of the Granger causality test. The results of the research show a significant unidirectional causal relationship according to Granger, which starts from the direction of banks' credit activity towards economic growth. The results of the conducted research study can be useful to the makers of the economic policy and the creators of a strategy for the development of the national economy.

The paper analyses the neutrality of taxation of investment projects on the example of Serbia. The aim of the research is to confirm/reject the existence of uniformity of the tax burden on investment projects that differ regarding the asset type, industry and the source of finance. The uniformity of tax burden, that is, the absence of discrimination and distortive effects of taxation, may be considered a confirmation of the tax neutrality. To investigate neutrality of taxation the analysis employed King-Fullerton framework of calculating effective marginal tax rates. The research results show that the tax treatment of investment projects in Serbia is nondiscriminatory. Marginal effective tax rates for different types of investment projects do not vary widely; that is, there are no investment projects that have a markedly favourable (unfavourable) tax treatment compared to the other types of investment projects.