The Impact of Global Financial Crisis in the Albanian Banking System

TAMARA BACKOVIĆ VULIĆ - BIBLIOGRAFIJA Rad objavljen u renomiranom međunarodnom časopisu:

1. Vesna Karadžić and Tamara Backović, “The Montenegrin Capital Market: Calendar Anomalies”, Economic Annals, Volume LVI, No. 191, 2011., ISSN: 0013 – 3264 »Časopis “Economic Annals” je akademski časopis koji se publikuje kvartalno. Izdavač je Ekonomski fakultet u Beogradu, Univerzitet u Beogradu. Radovi se objavljuju na engleskom jeziku. Časopis je rangiran u bazi podataka Elsevier Scopus® od strane SCImago Journal & Country Rank rangom Q3.

2. Tamara Backović Vulić, “Characteristics of Montenegrin capital market in terms of

efficiency”, odobren za štampanje u narednom broju časopisa Journal of Social and Business Studies, Volume 1, Issue 2, 2014. , ISSN print: 2303-6044, ISSN online: 2303-6176

»Časopis “Journal of Social and Business Studies” je međunarodni časopis koji se publikuje dvomjesečno. Izdavač je Social and Business Development Cenar u Sarajevu, neprofitna organizacija čiji je cilj poslovanja unapređenje obrazovanja, društva, kulture, poslovnog i tehnološkog razvoja kroz organizovanje seminara i konferencija, kao i objavljivanjem rezultata naučnih istraživanja. Radovi se objavljuju na engleskom jeziku. Časopis je indeksiran u sledećim međunarodnim bazama: Open Academic Journals Index (oaji.net), Google Scholar (scholar.google.com) i SHERPA/RoMEO (www.sherpa.ac.uk).

Ostali objavljeni radovi:

3. Tamara Backović, “Analiza vremenskih serija na primeru berzanskih indeksa u Crnoj Gori”, Preduzetnička ekonomija, Volume XIV, 2006., ISSN 1451-6659

4. Tamara Backović, “Proces donošenja odluke – intuicija ili primena formalnog modela odlučivanja”, Preduzetnička ekonomija, Volume IX, 2005., ISSN 1451-6659

5. Tamara Backović, “Uticaj preduzetništva na ekonomski rast i razvoj – teorijsko-empirijski pristup”, Entrepreneurial economy, Volume VII, 2004., ISSN 1451-6659

Radovi prezentovani na međunarodnim konferencijama:

6. Tamara Backović Vulić, “Testing the Efficient Market Hypothesis and its Citics - Application on the Montenegrin Stock Exchange”, IX Annual Conference “Global Imbalances, Financial Institutions, and Reforms in the Post-Crisis Era” organized by European Economics and Finance Society in Athens, Greece, 2010. published on website address: http://www.eefs.eu/conf/Athens/Papers/550.pdf

7. Vesna Karadžić and Tamara Backović, “Stock Exchange Characteristics Based on Financial Time Series Analysis”, 6th International Conference of ASECU: Economic Development, Tax System and Income Distribution in the Countries of Southern and Eastern Europe, 2010.

8. Vesna Karadžić and Tamara Backović, “Financial time series analysis based on Montenegrin stock exchange market indices”, VIII Annual Conference “Current Challenges in the Global Economy: Prospects and Policy Reforms”organized by European Economics and Finance Society in Warshaw,Poland, 2009. published on website address: www.eefs.eu/conf/Warsaw/Papers/580a.pdf

9. Vesna Karadžić and Tamara Backović, „Applied analysis of financial time series based on

the Montenegrin capital market indices“, International Conference on Applied Economics (ICOAE), Thesalloniki, 2008. published on website address: http://kastoria.teikoz.gr/icoae2/wordpress/wp-content/uploads/articles/2011/10/054-2008.pdf

Tamara Backovic Vulic <[email protected]>

JSBS 14 - Editorial Decision

Editor <[email protected]> Mon, Nov 3, 2014 at 3:11 PMTo: Tamara Backovic Vulic <[email protected]>Cc: Emina Mekic <[email protected]>

Dear Dr Backovic Vulic,

This is to inform that our Editorial team decided to accept your paper "Characteristics of the Montenegrin CapitalMarket in Terms of Efficiency" for publication in Volume 1 Issue 2. Please be informed that in order to cover thecosts of journal design and printing, donation/publication fee is 45 $. Please follow our instructions for yourpayments http://www.sbdcenter.com/donate/ and we will send you invoice by PayPal in next email.

Thank you for your support and your contributions.

On Thu, Oct 16, 2014 at 5:45 PM, <[email protected]> wrote:[Quoted text hidden]

-- Mersid PoturakSocial and Business Development Center Chairman of AssemblyJournal of Social and Business Studies Editorwww.sbdcenter.com

ISSN: 2303-6044

Vol. 1 No. 1

JOURNAL OF SOCIAL

AND BUSINESS STUDIES

September, 2014

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ISSN: 2303-6044

Vol. 1 No. 1

JOURNAL OF SOCIAL

AND BUSINESS STUDIES

September, 2014

PUBLISHER

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Adress: Ramiza Salčina 93, 71 000 Sarajevo

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Journal of Social and Business Studies (JSBS) is an international, interdisciplinary peer-reviewed journal,

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EDITORIAL BOARD

Surname, name

University

Country

Bayraktaroglu Serkan

Sakarya University

TURKEY

Coskun Ali

Fatih University

TURKEY

Dhaoui Abderrazak

University of Sousse

TUNISIA

Ibrakovic Dzelal

University of Sarajevo

BOSNIA AND HERZEGOVINA

Kozarevic Emira

University of Tuzla


Kozarevic Safet

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Okičić Jasmina

University of Tuzla


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International University of

Sarajevo


Ozlen Muhamed Kursad

Ishik University

IRAQ

Shah Iqtidar Ali

College of Applied Sciences

OMAN

JOURNAL OF SOCIAL AND BUSINESS STUDIES

(Volume 1 / Issue 1 / Sept 2014)

CONTENT

Refereed Articles

1 Short-Run Determinants of the HRK/USD Exchange Rate and Policy Implications

Yu Hsing

11 The Impact of Global Financial Crisis in the Albanian Banking System

Alba Cani

29 Is the Republic of Macedonia “Good Lover”? Republic of Macedonia-NATO-EU Case

Study

Biljana Chavkoska

42 Creating Value Added for Leasing Service Customers: Case Study of VB Leasing


Slobodan Vujić, Saša Vujić, Aida Abduzaimović, Ibrahim Obhodaš

55 Consumers Perceptions about Packaging Appearance of Meggle, Milkos and Zim Milk

Products

Ibrahim Obhodaš, Slobodan Vujić, Saša Vujić, Aida Abduzaimović

68 Perceptions towards IT Security of Online Banking by Students of Montenegro

Nedim Makarević

Journal of Social and Business Studies

ISSN: 2303-6044

Vol. 1(1) / pp. 1-10

Social and Business Development Center – www.sbdcenter.com

1

Short-Run Determinants of the HRK/USD Exchange Rate and Policy Implications

Yu Hsing

Southeastern Louisiana University

United States of America

[email protected]

Citation:

Hsing, Y. (2014). Short-Run Determinants of the HRK/USD Exchange Rate and Policy Implications. Journal of Social and

Business Studies, 1(1), 1-10

Article History

Submitted: 17 July 2014

Resubmitted: 31 July 2014

Accepted: 12 August 2014

Abstract

This paper examines short-run determinants of the Croatian kuna/U.S. dollar

(HRK/USD) exchange rate based on a simultaneous-equation model. Demand

and supply analysis is employed to examine the behavior of the HRK/USD

exchange rate. Comparative static analysis is used to determine the impact of a

change in an exogenous variable on the equilibrium exchange rate. The

EGARCH model is applied in empirical work. Major findings are that the

HRK/USD exchange rate is positively associated with the real 10-year U.S.

government bond yield, real GDP in Croatia, the real stock price in the U.S.

and expected exchange rate and is negatively influenced by real GDP in the

U.S. and the real stock price in Croatia.

Keywords: Exchange Rate Determination; Interest Rates; Output, Stock Prices;

EGARCH

JEL Classification: F31, F41


Yu Hsing Journal of Social and Business Studies

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2

1. Introduction

International trade has become more important in economic growth in Croatia. In 2013, the amount of

exports as a percent of GDP was 42.97%, and the amount of imports as a percent of GDP was 42.42%,

suggesting that Croatia had a relatively high trade openness index of 85.39%. To pursue a balanced

trade or to avoid a trade deficit, the exchange rate plays a pivotal role. Mainly due to the global

financial crisis, the Croatian kuna had depreciated 20.79% versus the U.S. dollar from 4.59398 in

2008.Q1 to 5.549 in 2013.Q4. While depreciation of the kuna would lead to more exports, it is

expected to have some negative effects such as higher costs of imports, import-led inflation,

international capital outflows, etc.

A volatile exchange rate is expected to hurt international trade and economic growth because importers

and exporters are uncertain about costs of exchange for foreign currencies and profits or losses that

trade may have. A substantially over-valued currency would be difficult to maintain as a government

needs to continue to sell foreign reserves to defend the domestic currency and may result in a potential

speculative attack. A substantially under-valued currency would help exports but may be subject to

external pressures to move it to the fundamental value.

This paper attempts to use demand and supply analysis to explain fluctuations of the HRK/USD

exchange rate in order to provide policymakers insights in conducting monetary policy and fiscal

policy to stabilize exchange rates and to pursue economic growth.

In the second section, literature will be surveyed. In the third section, the methodology will be

presented. In the fourth section, the data and empirical results will be reported and analyzed. A

conclusion will be made in the last section.

2. Literature Review

There have been several studies examining the determinants of exchange rates for Croatia or related

countries. Baharumshah and Borsic (2008) study purchasing power parity (PPP) for 13 Central and

Eastern European countries and find that PPP is valid for Croatia if either the U.S. dollar or the euro is

used. Tkalec and Vizek (2011) shows that absolute purchasing power parity holds for Croatia in the

long run, suggesting that the exchange rate is in accord with the fundamentals. They also report that

exchange rate pass-through to the domestic consumer price is not confirmed. Miteza (2012) examines

PPP for 6 Central and East European countries and finds that PPP is confirmed for four of six countries

and that the is very strong evidence of PPP for Slovakia, Poland and the Czech Republic. Kozul (2013)


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3

tests whether PPP applies to the Croatian kuna/euro exchange rate based on ADL and Engle-Granger

tests and finds that PPP does not hold for Croatia.

Funda and Lukinić (2008) indicate that the Balassa-Samuelson effect in Croatia is not confirmed and is

not expected to become an obstacle to satisfying the convergence criteria. Erjavec, Cota and Jakšić, S.

(2012) reveal that the main reason for the volatility of the Croatian kuna exchange rate comes from

demand shocks instead of supply shocks in the short run and long run. Hence, the exchange rate serves

as a shock absorber.

To the author‟s best knowledge, few of these studies have applied demand and supply analysis in

foreign exchange markets to determine the HRK/USD exchange rate in the short run. Monetary models

of exchange rates are based on the validity of purchasing power parity in the long run. In addition to

interest rates or stock prices, exchange rates may be affected by other variables. This paper attempts to

examine the HRK/USD exchange rate based on a simultaneous-equation model. The demand for and

the supply of the U.S. dollar versus the Croatian kuna are considered simultaneously in determining the

equilibrium HRK/USD exchange rate. A study of the determinants of the HRK/U.S. dollar exchange

rate would provide policymakers with more insights into the behavior of the kuna and other currencies.

3. Methodology

We can express the demand for and supply of the U.S. dollar versus the Croatian kuna in the foreign

exchange market as:

),,,,( eUSUSHRd ERYAUSD (1)

− + + + +

),,,( HRHRUSs ERYBUSD (2)

+ + + +

where

USDd = demand for the U.S. dollar,

USDs = supply of the U.S. dollar,

ε = the HRK/USD (Croatian kuna/U.S. dollar) exchange rate,

YHR

= real GDP or income in Croatia,

RUS

= the real interest rate in the U.S.,

EUS

= the real equity or stock price in the U.S.,

εe = the expected HRK/USD exchange rate,

YUS

= real GDP or income in the U.S.,


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4

RHR

= the real interest rate in Croatia,

EHR

= the real equity or stock price in Croatia.

We expect that the demand for the U.S. dollar has a negative relationship with the HRK/USD exchange

rate and a positive relationship with real GDP or income in Croatia, the real interest rate in the U.S., the

stock price in the U.S., and the expected HRK/USD exchange rate. The supply of the U.S. dollar is

expected to be positively associated with the HRK/USD exchange rate, real GDP or income in the U.S.,

the real interest rate in Croatia, and the stock price in Croatia. As real GDP or income in Croatia rises,

Croatians tend to import more goods and services from the U.S. and increase the demand for the U.S.

dollar. When real GDP or income in the U.S. rises, Americans tend to import more goods and services

from Croatia and increase the supply of the U.S. dollar in exchange for the Croatian kuna. A higher real

interest rate or stock price in the U.S. tends to attract Croatians to invest in these financial assets and to

increase the demand for the U.S. dollar. On the other hand, a higher real interest rate or stock price in

Croatia tends to attract American investors to buy these financial assets and increase the supply of the

U.S. dollar in exchange for the Croatian kuna.

Solving for the equilibrium values of the two endogenous variables simultaneously, we can express the

equilibrium exchange rate as a function of all the exogenous variables:

),,,,,,( eHRUSHRUSHRUS EEYYRRf (3)

Comparative static analysis shows that a change in any one of the exogenous variables is expected to

have an impact on the equilibrium HRK/USD exchange rate

0// JAR USR

US (4)

0// JBR HRR

HR (5)

0// JBY USY

US (6)

0// JAY HRY

HR (7)

0// JAE USE

US (8)

0// JBE HRE

HR (9)

0// JA e

e

(10)


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where )( BAJ is the Jacobian for the endogenous variables and has a negative value.

Note that in the monetary models based on the equilibrium condition in the money market, the sign of

the interest rate differential between Croatia and the U.S. may be positive or negative, depending upon

whether the Bilson (1978) model or the Dornbusch (1976) and Frankel (1979) models would apply.

Furthermore, the traditional view suggests that an increase in the interest rate would cause a currency to

appreciate whereas the revisionist view shows that a higher interest rate would cause a currency to

depreciate due to a higher default probability, a weaker financial position of firms that are debt

constrained, and a higher exchange rate risk premium (Huang, Hueng and Yau, 2010).

4. Empirical Results

The data were collected from the International Financial Statistics, which is published by the

International Monetary Fund. The HRK/USD exchange rate measures units of the kuna per U.S. dollar.

Hence, an increase means an appreciation of the U.S. dollar or a depreciation of the Croatian kuna. The

real interest rate in the U.S. is represented by the real 10-year government bond yield minus the

inflation rate in the U.S. Due to lack of data for the government bond yield, the real interest rate in

Croatia is represented by the government bond yield in the euro area minus the inflation rate in Croatia.

Real GDP in the U.S. or Croatia is an index number measured at the 2005 year. The expected exchange

rate is represented by the average HRK/USD exchange rate of past four quarters. The stock price in the

U.S. is represented by the share price in the U.S., and the stock value in Croatia is measured by the

share price in Croatia. The sample consists of quarterly data ranging from 1997.Q3 to 2013.Q4 and has

a total of 66 observations.

The ADF test on the regression residuals is employed to determine whether these time series variables

are cointgegrated. The value of the test statistic is estimated to be -3.3381, which is greater than the

critical value of -2.6016 in absolute values at the 1% level. Therefore, these variables have a long-term

stable relationship.

Table 1 presents estimated coefficients and other related statistics. The EGARCH method is applied in

empirical estimation in order to yield a positive conditional variance without restriction on the

parameters. As shown, 90.53% of the change in the equilibrium HRK/USD exchange rate can be

explained by the right-hand side variables. Except for the coefficient of the real government bond yield

in the euro area, other coefficients are significant at the 1% level. The equilibrium HRK/USD exchange

rate is positively associated with the real 10-year U.S. government bond yield, real GDP in Croatia, the

real stock price in the U.S., and the expected exchange rate. It is negatively affected by real GDP in the


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U.S. and the real stock price in Croatia. The negative coefficient of the real government bond yield in

the euro area is insignificant at the 10% level.

Several comments can be made. It appears that the coefficient of any variable for the U.S. is greater

than the coefficient of the corresponding variable for Croatia in absolute values. A 1 percentage-point

increase in the real 10-year U.S. government bond yield would raise the HRK/USD exchange rate by

0.1034. A 1 unit increase in U.S. real GDP would reduce the HRK/USD exchange rate by 0.0071

whereas a 1 unit increase in the Croatian real GDP would raise the HRK/USD exchange rate by 0.0021.

A one unit increase in the stock price index in the U.S. would increase the HRK/USD exchange rate by

00130 whereas a one unit increase in the stock price index in Croatia would reduce the HRK/USD

exchange rate by 0.0048. If the expected exchange rate rises by 1, the actual exchange rate would

increase by 0.7563.

Table I. Estimated Regression of the HRK/USD Exchange Rate

Dependent variable: HRK/USD exchange rate Coefficient z-statistics

Real 10-year U.S. government bond yield 0.1034 20.0003

Real euro government bond yield -0.0065 -1.4698

Real GDP in the U.S. -0.0071 -21.5008

Real GDP in Croatia 0.0021 3.4653

Real stock price in the U.S. 0.0130 16.8446

Real stock price in Croatia --0.0048 -22.7988

Expected HRK/USD exchange rate 0.7563 70.8176

Constant 1.0161 6.7125

R2 0.9053

Mean absolute percent error 4.3680%

Sample period 1997.Q13-

2013.Q4

Number of observations 66

Methodology EGARCH

Notes: Except for the coefficient of the real euro government bond yield, other coefficients are significant at the 1% level.

HRK stands for the Croatian kuna.

Several other versions are tested to determine whether the results may change. If the real euro

government bond yield is replaced by the real deposit rate in Croatia, its coefficient is negative but

insignificant at the 10% level. The R2 value of 0.9055 is very similar to the R

2 value of 0.9053 as

reported in Table 1. Except for the real government bond yields with negative values, when the log


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form is used, only the coefficients of the real U.S. government yield and the real stock price in Croatia

are significant whereas other coefficients are insignificant at the 10% level.

5. Summary and Conclusions

This paper has examined the determinants of the HRK/USD exchange rate in the short run based on a

simultaneous-equation model consisting of the demand for and supply of the U.S. dollar. A reduced-

form equation is estimated by the EGARCH method. The paper finds that a higher real U.S.

government bond yield, a higher real GDP in Croatia, a higher real stock price in the U.S., and a higher

expected exchange rate would raise the HRK/USD exchange rate whereas a higher U.S. real GDP and a

real higher stock price in Croatia would reduce the HRK/USD exchange rate.

There are several policy implications. It seems that demand and supply analysis of exchange rates in

the short run works reasonably well as it can explain approximately 90.53% of exchange rate

movements. The forecast error of 4.368% is relatively small. Interest rates, real GDP, stock prices and

the expected exchange rate in the U.S. and/or Croatia play important roles in exchange rate movements

in the short run. Recent higher real U.S. government bond yields or rising U.S. stock prices tend to

raise the HRK/USD exchange rate. Recent higher real government bond yields in the euro area or

higher U.S. real GDP would reduce the HRK/USD exchange rate. The current weaker economy in

Croatia is likely to put smaller downward pressure on the HRK/USD exchange rate. Relatively stable

stock prices in Croatia tend to stabilize the HRK/USD exchange rate.

6. References

Baharumshah, A. Z. & D. Borsic (2008). Purchasing Power Parity in Central & Eastern European

Pountries. Economics bulletin, 6, 1-8.

Bilson, J. F. O. (1978). Rational Expectations & the Exchange Rate in: J. Frenkel & H. Johnson, eds.

Economics of Exchange Rates (Addison-Wesley Press, Reading).

Broz, T. & T. Ridzak (2007). Exchange Rate Misalignment-A Case of Croatia. 4th International

Conference Global Challenges for Competitiveness: Business & Government Perspective

Chen, C. F., C. H. Shen, & C. A. A. Wang (2007). Does PPP Hold for Big Mac Price or Consumer

Price Index? Evidence from Panel Cointegration. Economics Bulletin, 6, 1-15.


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Chen, S. S. (2006). Revisiting the Interest Rate–Exchange Rate Nexus: A Markov-Switching

Approach. Journal of Development Economics, 79, 208-224.

Chen, S. W. (2009). Random Walks in Asian Foreign Exchange Markets: Evidence from New Multiple

Variance Ratio Tests. Economics Bulletin, 29, 1296-1307.

Cheung, Y.-W., M. D. Chinn, & A. G. Pascual (2005). Empirical Exchange Rate Models of the

Nineties: Are Any Fit to Survive? Journal of International Money & Finance, 24, 1150-1175.

Chinn, M. D. (1999). On the Won & Other East Asian Currencies. International Journal of Finance &

Economics, 4, 113-127.

Choudhry, T. (2005). Asian Currency Crisis & the Generalized PPP: Evidence from the Far East. Asian

economic journal, 19, 137-157.

Dornbusch, R. (1976). Expectations & Exchange Rate Dynamics. Journal of Political Economy, 84,

1161-1176.

Engel, C. (2010). Exchange Rate Policies. A Federal Reserve Bank of Dallas Staff Paper, DIANE

Publishing.

Erjavec, N., B. Cota, & S. Jakšić (2012). Sources of Exchange Rate Fluctuations: Empirical Evidence

from Croatia. Privredna kretanja i ekonomska politika, 22, 27-46.

Frankel, J. A. (1979). On the Mark: A Theory of Floating Exchange Rates based on Real Interest

differentials. American Economic Review, 69, 610-622.

Frenkel, J. A. (1976). A Monetary Approach to the Exchange Rate: Doctrinal Aspects & Empirical

Evidence. Scandinavian Journal of Economics, 78, 200-224.

Funda, J. & G. Lukinić (2008). Assessment of the Balassa-Samuelson Effect in Croatia. Financial

Theory & Practice, 31, 321-351.

Granger, C. W.J., B.-N.g Huang, & C.-W. Yang (2000). A Bivariate Causality between Stock Prices &

Exchange Rates: Evidence from Recent Asian Flu. The Quarterly Review of Economics & Finance, 40,

337-354.


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Hacker, R. S., H. K. Karlsson, & K. Månsson, (2014). An Investigation of the Causal Relations

between Exchange Rates & Interest Rate Differentials Using Wavelets. International Review of

Economics & Finance, 29, 321-329.

Ho, C. C., S. Y. Cheng, & H. Hou (2009). Purchasing Power Parity & Country Characteristics:

Evidence from Time Series Analysis. Economics Bulletin, 29, 444-456.

Kozul, I. (2013). Cointegration Analysis of Purchasing Power Parity in Republic Of Croatia. UTMS

Journal of Economics, 4, 253-268.

Miteza, I. (2012). The Law of One Price in Six Central & Eastern European Economies. Comparative

Economic Studies, 54, 581-596.

Park, D. (2011). Empirical Studies in Exchange Rates & Foreign Exchange Markets: A Survey. Asian

Journal of Financial Studies, 24, 851-908.

Saadaoui, J. (2011). Exchange Rate Dynamics & Fundamental Equilibrium Exchange

Rates. Economics Bulletin, 31, 1993-2005.

Schweigert, T. E. (2004). Croatian Exchange Rate Policy: Nominal Stability & Real Consequences.

Proceedings of Academy of Business & Administrative Sciences XI International Conference.

Seong, L. M. (2013). Reactions of Exchange Rates towards Malaysia Stock Market: Goods Market

Approach & Portfolio Balanced Approach. Interdisciplinary Journal of Contemporary Research in

Business, 5, 113-120.

Sorona, R. J. & J. Tica (2010). Purchasing Power Parity in CEE & Post-War Former Yugoslav

States. Czech Journal of Economics & Finance (Finance a uver), 60, 213-225.

Šošić, V. & E. Kraft (2006). Floating with a Large Life Jacket: Monetary & Exchange Rate Policies in

Croatia under Dollarization. Contemporary Economic Policy, 24, 492-506.

Tkalec, M. & M. Vizek (2010). Should the CNB Devaluate the Exchange Rate? Evidence from

Purchasing Power Parity. 16th Dubrovnik Economic Conference, Young Economists Seminar.


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Tkalec, M. & M. Vizek (2011). Purchasing Power Parity in a Transition Country: The Case of

Croatia. Comparative Economic Studies, 53, 223-238.


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Vol. 1(1) / pp.11-28


11

The Impact of Global Financial Crisis in the Albanian Banking System

Alba Cani

Epoka University

Tirana, Albania

[email protected]

Citation: Cani, A. (2014). The Impact of Global Financial Crisis in the Albanian Banking System. Journal of Social and

Business Studies, 1(1), 11-28.

Article History

Submitted: 02 August 2014

Resubmitted: 15 August 2014


Abstract

The banking system in Albania is represented as a consolidated and sustainable system.

Participation of powerful banking groups in the Albanian market could be seen as a

positive sign that provides security for the continuation of the growth and development

of this market. However, on the other hand, today's economy is severely affected by the

global financial crisis. The effects of this crisis we can also see in Albanian banking

system. Its impact was felt in every area of the Albanian economy, especially in the

financial intermediaries. The banking system, as one of the leading representatives of

financial intermediaries, is facing numerous difficulties as a result of the financial

crisis. The main purpose of this study is to examine the negative impacts of financial

crises in the Albanian banking sector. Therefore, this paper aims to investigate different

factors such as: injection of abundant liquidity, increased control over the banks of the

second level and pressure to increase transparency of banks and their influence on

current economic situation of the Albanian banking system. This study provides answer

on some research question such as: What are the possibilities for intervention to

prevent the negative effects of the crisis as well as to improve the situation? What are

these interventions and how should be implemented? Is there sufficient capacity for the

banking system to overpass the negative impact of this situation? This study concludes

with the result that the effec of financial crisis are felt in Albanian economy and

banking system but not with the same impact as in developed countries.

Keywords: Financial Crisis; Banking System; Sub-prime Mortgage Nonperforming

Loans EGARCH

JEL Classification: G010, G180, G210


Alba Cani Journal of Social and Business Studies

ISSN: 2303-6044


12

1. Introduction

The economy is one of the areas where unexpected developments occur with high rates. Today the

global economy is facing problems and challenges that are unusual. The financial crisis has worried

almost all economists. Many questions and problems are solved unanimously, for other questions and

problems there are debates, while for some others no solutions are found. The question that arises is

whether should these crises happen; Are they normal for the global economy or they are artificially

created for geopolitical reasons?!

A popular expression says "the economy without crisis cannot be imagined in the same way as

Christianity cannot be perceived without hell." The arguments for the presence of crises are different

but we are interested to exit as soon as possible from this situation. Many countries have taken

measures to prevent negative effects on their economies or at least to minimize these effects. It is seen

that some countries have intervened in the right time with appropriate measures while some states have

delayed their decisions. Albania is a country which was not affected directly by the global financial

crisis because Albania is a country not well integrated into global financial markets. This negative side

of the Albanian finances made the effects of the crisis in Albania came indirectly and in a softer way

compared to developed countries. The reduction of remittances, lower consumer spending (more as a

result of panic), the problems of construction market, increased price of fuel and devaluation of the

Albanian Leke against foreign currencies, were some of the first effects of the crisis in the Albanian

economy. In the last quarter of year 2007 and first quarter of 2008 in Albania, economists started to

give their opinions and ideas about the crisis issue. Some solutions were taken ready by developed

countries and should only be implemented. Some other solutions were needed to be adapted to the

Albanian reality. So, from 2008 until now much focus is put to the measures to prevent the crisis

affecting Albanian economy. One of the fields that economists were cautious was the banking system.

The exposition of the Albanian banking system taking into consideration the effect of crisis is the main

issue of this research paper. The methodology used is a thorough study, based on a specialized

knowledge in Accounting and Financial Reporting courses obtained during a period of one year and the

Finance-Accounting courses and knowledge obtained during a three year period, as well as material

and theoretical studies important in the field of economy. The paper was prepared on the basis of

statistical data and uses a narrative approach, and comparative analysis regarding the problems and

effects of the crisis in the banking system.

The paper is organized as follows: the first section gives a thorough study for the global financial crisis

being followed by the financial crisis and central banking. The third part includes a study done for the


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effects of this crisis in Albanian Banking sector. Finally, conclusions and recommendations are given

regarding the research papers‟ topic.


Globalization is viewed as the integration of the world in a single village where economic, political and

events that occur in one part of the world affect people in other parts of the world (Okeke, 2010).

According to Hausler (2002) globalization has to do with liberalization and integration of economies

including investment and trade, which has influenced financial and capital markets in the last decades.

In the findings of Balino (2000) the deregulation of banking activities was caused by the globalization

of finance.

Leyshon (1995) has found that liberalized financial markets are the source of increased financial assets

related with allocation of financial resources. Adei (2004) states that globalization has increased

chances for growth and development in some areas but there has been an increase in inequality

experienced especially by developed countries where Albania is part of this developing countries.

Based on different studies the financial crises is an immediate unexpected drop in the value of financial

assets owned by financial institutions.

Sanusi (2010) discovered that there are different factors that trigger the financial crisis such as:

negative investments ideology associated by fear or panic. This situation of fear and panic causes

further withdrawal of money from investors thus leading to increasing declines. Moreover, financial

networks and markets become unable to function and then collapse. According to Adamu (2010)

financial crisis shows its first signs when some financial institutions or assets lose a large part of their

value. Different scholars in the field of economics and finance have predicted the negative economic

effects before the current global financial crisis was spread in different parts of the world.

Minsky (1995) has cited that global financial integration is associated by the era of expansive

capitalism. Pettifor (2003) concluded that the credit expansion is fueled by the financial sector

expansion. This situation has initiated the creation of the “credit bubble” which has financed bubble in

assets, stocks, shares and property. According to Stiglitz (2010) the great recession of 2008 is

considered to be a complex issue and the causes of this crises were: underwriting standards for sub-

prime mortgages; flaws in credit rating agencies as well as risk management weaknesses at some large

U.S and European financial institutions.


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3. The Global Financial Crisis

The term financial crisis is used to describe a wide range of situations in which some financial

institutions immediately lose a large part of their value. During a financial crisis, the unemployment

rate increases within a short period of time as many factories and production lines shut down

unexpectedly. Banks suspend many of these credits and loans resulted in nonperforming loans. Prices

fell everywhere, certainly influenced by the stock exchange market.

Many economists have offered their theories how the financial crises arise and evolve, what are their

causes and effects as well as ways to prevent them. However, researchers have not yet reached a

consensus on these issues and financial crises still represent a common phenomenon in the world

economy. The biggest financial crisis in history is considered the Great Depression in 1929 which

ended in 1945 based on statistical data.

Who were the causes of the crisis?

The financial crisis happened because of funding and acquisitions in the real estate, especially in the

housing sector. Actors of the crisis were individuals in the United States of America, who were

motivated by high prices of houses and got credit for buying them. The motivation for these purchases

of houses was based on the belief that over time, real estate prices would continue to rise, so a property

bought today would have a higher value a few months later, even if no investment was made on it.

Therefore, more and more buyers entered the market by raising the prices that were initially very high.

Another group of actors in this crisis were international financial institutions, which made capital

available in the form of credit for those individuals interested in real estate. The problem here is

doubled: primarily they attracted buyers with loans, the interest of which was initially very low, and

then went to another extreme of growth. The fact of increasing interest rate normally would have been

a problem for buyers, but their belief that they would be able to sell their properties for a higher price in

a very short period of time eliminated this concern from their minds. Secondly, banks gave credit not

only to qualified individuals based on their profile and revenues but also to those who clearly had a

higher risk profile, as they were unemployed or did not have a certain level of income to ensure paying

the loan. Naturally, it is surprising that how institutions like banks that have whole departments for

credit risk analysis, granted loans to these kinds of persons.

The explanation is as follows: Firstly, the mentality of increased prices was available even for the

banks, which believed that if individuals for one reason or another cannot make their payments, they

will be able to receive real estate and sell with higher prices, providing capital and principal and their


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profits. Secondly, banks took an unusual step, by buying insurances regarding these loans, with the idea

that if the housing market demolished, they will get back the money that they had previously lent. This

brings us to the third group of actors of the financial crisis: the insurance company.

The concept of insurance companies works because even though insurance as a form of security were

purchased by many individuals or companies, only a few of them in fact need to use these insurance

plans. In this case, exactly the opposite happened. Housing prices which were grown without any basis

for the development of real estate burst like a bubble, engendering the financial crisis. The first

bankruptcy occurred to a mass of people, who may not be able to resell their homes, soon followed by

the failure of insurance companies, which were forced to pay according to contracts of banks.

The global financial crisis is not reflected in the same way in the whole economies of the countries

because of the different characteristics of the organization of the financial system and the economic one

of each country.

The financial crisis and central banking

Some years ago, in some countries central banking defined the appropriate level of short-term interest

rates in order to have a desired rate of inflation. Now everything is more complicated. The emergence

of the credit crisis has caused central banks to inject enormous amounts of liquidity in their banking

systems to support lending to the economy to limit recession. In different situations, they had to

cooperate with respective governments to recapitalize banks, which otherwise would have gone

bankrupt, causing a huge economic imbalance than that currently experienced. However, if the

assumptions are not completely wrong, it seems clear that the situation will not be as severe as during

the Great Depression, when the GDP in the United States fell by 25% during 1929-1932.

According to forecasts, in 2010 the world GDP marked the highest value that has been seen ever. There

is a clear movement of income from rich people to poor ones, and so far China has shown a very good

performance. The current recession has affected the private sector and particularly financial sector. The

main Cause include excessive optimism on the progress of ongoing economic growth which led to the

underestimation of credit risk by banks, other lenders and investors. In the United States, it seems clear

that the performance of subprime mortgage loans, which were expected to bring profits also enabling

the poorest people to possess a house, went out of control. However, there were other reasons, mainly

related to the management of banks and other financial institutions. The uncertainty on the extent of the

recession has been high, because it is caused by malfunction of the overall financial sector, which is

central to the economy and it is assumed that it provides access to the means of payment and allocation

of limited resources to the most productive uses.


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If something is not progressing in this industry, it is likely that the consequences be much more severe

than in the case of problems in other sectors.

The primary objective of monetary policy has been to reduce the negative effects caused from the crisis

in the economy. Specifically:

Central banks have granted more loans to commercial banks, to reduce the pressure of the credit

contraction and to assist in the process of granting new loans. To achieve this, the central banks

have accepted a wider range of assets as collateral. As a result, the central bank balance sheets have

grown enormously.

Central banks introduced new institutional instruments to guarantee international liquidity, despite

weakness in the international networks of commercial banks.

Interest rates were reduced to minimum levels to encourage spending and in particular to reduce the

burden of debts.

In the case of commercial banks threatened by bankruptcy, the governments have provided new

loans aimed at continuance of activity. Experience of Lehman Brothers showed us that

consequences may lead to the bankruptcy of a large financial group.

Revenues from taxes have fallen everywhere and government spending primarily to support banks,

are increased. Consequently, budget deficits are expanded.

Since the beginning of the crisis, banks have received new capital more than 1 trillion dollars, this

figure roughly equal to the total decrease of the value of the assets in the balance sheet. IMF predicts

that the banks will need $ 875 billion to restore report of assets / capital in 25, or 1.7 trillion dollars to

decrease this report in 17. Therefore the process of recapitalizing the banking sector is a complicated

process and needs a long time to be completed.

It is not easy for commercial banks to collect new capital and this for several reasons:

Criteria for securing capital and liquidity will be stronger and tougher than in the past and it will

reduce the rate of return on capital used.

Many of accounting issues that caused uncertainty about the net value of banks are not solved yet.

Some sovereign wealthy funds have lost significant amounts of money by supplying banks with

new capital during the beginning of the crisis. If the economy continues to weaken, then the

government may need to inject more capital to ensure a sustainable economic activity. Despite the

progress of the future of the economy, it is likely that most of the additional capital will come from

retained earnings.

Consequently, this causes the following effects:

Differences between deposits‟ interest rates and bank loans‟ interest rates will be larger than in the

past.


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Official interest rates will stay low for a long time, to maintain low cost of borrowing.

The opinion of lending banks will remain cautious for a long time.

Banking will be a less competitive form of financial intermediation than in the past and financing of

capital markets will be relatively more important.

International Development

The global economy continued to slow in 2012. Most of developed countries experienced continuous

contraction of GDP during this year, while emerging economies marked moderate growth rates. High

rates of unemployment, the weakness of aggregate demand, the need for fiscal consolidation and

reduction of borrowing of businesses and families have taken the form of a negative spiral for the

majority of developed economies. Financial markets have reflected this difficulty and are characterized

by risk premiums and higher yields. Developing countries have managed to maintain positive growth

values, although the above difficulties have affected the performance of exports and investment flows

to them. Global inflation pressures were generally restrained while remaining aligned to the emerging

economies rather than in industrialized countries.

The growth of the world economy during the second half of 2012, has been positive but at a slower

pace than in the first half of this year. Economic crunch was mostly seen in developed countries,

particularly in the Euro Zone, due to weakness in domestic consumption and investment, condition of

high unemployment, the collapse of the credit system and strong enforcement of strong fiscal reforms.

Emerging economies experienced economic growth in this period, although the pace of their

growth was driven by the decline of external demand and the implementation of restrictive policies

initiated from last year.

World Trade activity was weakened mainly due to the decline of demand for exports from

developed economies.

The performance of global financial markets has been generally positive in the last two quarters of

2012, reflecting the effects of policy initiatives mainly in the Euro Zone and the United States of

America (USA). Actions of the European Central Bank (ECB) as further facilitator of monetary policy,

commitment to purchase unlimited amount of publicly owned bonds in secondary markets,

restructuring of the banking sector in Spain, renovation of financial loan for Greece affected positively

the reliability of investors in financial markets. Rates of return required for state titles in the Euro Zone

declined and the marketing conditions, in almost all segments of the financial market, were improved.

Based on recent developments of macroeconomic indicators, global activity is expected to be recovered

gradually in late 2013 and strengthen this trend during the next year, supported by improved financial

conditions and monetary policies in most developed economies as well as in developing one.


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However, there are a number of risks such as:

The slow implementation of structural reforms in the Euro Zone,

The further contraction of global trade

Geopolitical conflicts and macroeconomic instability in the developed countries continue to be

present.

These factors may adversely affect the financial markets thus delaying the process of global economic

recovery.

Table 1: Some important macroeconomic indicators

The change of

GDP

Unemployment

Rate Inflation Rate

Countries / Years 2011 2012 2012 2011 2012

USA 1.8 2.2 8.1 3.2 2.1

Eurozone 1.4 -0.5 11.3 2.7 2.5

Germany 3.0 0.7 5.9 2.3 2.0

France 1.7 0.0 10.2 2.1 2.0

UK 0.9 0.0 7.9 4.5 2.8

Japan -0.5 1.6 4.3 -0.3 0.0

Source: (EUROSTAT, 2013)

4. Methodology

The aim of this study is to give a comprehensive overview of the impact of global financial crisis in

Albania being focused in its banking system. The methodology used for measuring the impact was

based on macroeconomic indicators and all the available official data and statistics were taken from

central institutions in Albania. Reports and statistics were sourced from institutions such as: Bank of

Albania, IMF and Eurostat. In terms of global financial crisis, the study is based on the books of

Mishkin and Marone being the primary sources for research paper. The reports issued from Central

Bank were useful in providing qualitative and quantitative analysis based on reliable data. The

methodology is based mainly on qualitative technique where there is done an analysis and

interpretation of information taken from sources such as: books, Bank of Albania, magazines and IMF.

The paper was prepared on the basis of statistical data and uses a narrative approach, and comparative

analysis regarding the problems and effects of the crisis in the banking system.


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5. Financial Crisis and Banking System

Current situation of the banking system

Nowadays several years after the financial crisis had started even the financial system in Albania has

begun to feel the adverse effects thus causing the banking activity to slow the pace of its development.

The current crisis felt by businesses and individuals has made the banking system in Albania to show

different problems. The increased level of nonperforming loans, lower interest rates of loans or lack of

liquidity are some of the main problems that the banking system has faced. In developing countries like

Albania the economic growth has been comparable to those of developed countries and it can be said

that there are still opportunities as well as economic potential for further development and growth. In

developing countries, as is also Albania, the inflation rate has been higher than in the developed

countries. This is because developing countries have also had a higher economic growth than

developed countries. On the other hand, it can be said that the global financial markets have not shown

stability. They have been highly volatile due to the problems triggered by the economies of Euro Zone

countries regarding to public debt.

The year 2012 has been a challenging year for the economy, for Albanian businesses, families as well

as for decision-making in microeconomic and macroeconomic level. Domestic and Foreign economic

and financial shocks have negatively affected the economic growth but they do not have infringed the

macroeconomic and financial stability of the country. Also, a negative impact in the financial markets

had the slow development of the economy of USA which in turn had influenced negatively the

financial markets of other countries. Albanian economy during 2012 was faced with favorable stroke,

coming from inside and outside environment. However, the economic developments of the year

generally remained within the parameters of economic stability, as in the real sector and the financial

sector. Output growth during the first nine months of the year was 1.6%, which was mainly affected by

increasing the level of services offered while shrinking the manufacturing sector. According to

INSTAT, employment in the economy grew by 0.33% on average; this increase was smaller than that

of 2.1% recorded the previous year.

The Albanian economy has recorded a positive growth of 1.6% in real terms during 2012. This

performance is influenced by the most comprehensive monetary stimulus and the improvement of

external economic and financial environment. Economic activity remains below the potential level

regardless of output growth. The latter is not associated with a general reduction of uncertainty,

affecting consumption and private investment, and consequently the supply and demand for loans.

Therefore, the demand for loans is estimated to be weak and dependent on the performance of slow rate

of economic activity, the uncertainty seen in the projections of the future, as well as on the cautious


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behavior of the banking system in the lending direction. Developments in the financial sector have

reflected the dynamics of the real sector of the economy and credit growth in its historical minimum.

Influencing factors include the lack of healthy demand from business and individuals, and the high

sensitivity to the banking sector to the risk of credit default. The quality of the loan portfolio continued

to deteriorate, as shown by the increase in weight of loans in their total 18.8% versus 22.5% a year ago.

In accordance with the above developments the average inflation resulted in 2% staying within the

limit set by the Bank of Albania. Inflationary expectations remained near the target. Exchange rate

remained generally stable and mitigated the impact of fluctuations in foreign price inflation.

In these conditions, in support of medium-term target for inflation and aiming the reduction of the

negative output gap, the Bank of Albania lowered its interest rate three times during the year, going

down from 4.75% to 4%. By reducing the costs of financing the banking system, the monetary

authority aims to reduce the interest rate of loans and increased consumption and investment in the

economy. Banking system records sound and liquid balance and good capitalization position but it

continues to be characterized by a special care in financing investment. The volume of activity

expanded at lower rates due to slower growth of deposits and significant reduction in the lending rates.

For the banking sector, credit risk represents the most important challenge of the activity, while

exposure of the system to market risks and liquidity risk remains moderate.

Despite the difficult economic context taking into account the financial stability during 2012, some

important indicators of financial health are improved. The banking sector is relatively protected against

the risks of financial markets, exchange rate fluctuations and interest rate. On the other hand, risks

associated with the real sector's ability to repay debt are added. In support of its supervisory functions

the Bank of Albania has further strengthened regulatory framework towards enhancing transparency

and disclosure of information, the quality of bank management and the harmonization of legislation

with the national standards. An investment in the orientation of banks toward strategic plans is done

with focus the domestic economy as well as reducing the problems regarding NPL-s.

The performance of the financial system appears stable and the banking sector is well-capitalized,

liquid and with profit growth indicators. The annual growth in deposits and loans has fallen especially

for the loan case the growth has fallen to low historic levels. Non-bank financial institutions, savings

and credit societies, insurance companies, private supplementary pension companies and investment

fund, have further expanded their activity. Beside the positive developments in the financial system,

credit quality continues to present a major problem for the lending institutions that carries out these

activities in the country.


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In Albania, the banking sector is the main financial intermediate. The level of financial intermediation

in Albania figured out as a ratio of assets of financial system to GDP is at 93.9% in the end of 2012.

The volume of assets of financial institutions rose by 2.9% compared with six months earlier and 7.3%

compared with a year ago. The banking sector remains a key segment of financial intermediation,

whose assets represent about 93.6% of the total assets of the financial system in general and about

87.9% of GDP.

Non-bank financial sector continues to reflect a lower total weight to total financial system. Total assets

of non-bank financial sector represent about 6.4% of the financial system, increasing the weight to 5.3

% for year 2011. This increase is due to the increased number of non-bank financial institutions. In late

2012, the share of non-bank financial sector activity to GDP was around 6%. So, it is clearly noted that

despite the fact that the global economic crisis has affected the Albanian financial system, there has

been an increase in its activity.

Financial crisis and its impact on banking system

Today in everyday people's lives, the word "crisis" has taken a certain sense from which derives any

negative phenomenon in the world economy and also in Albanian economy as well. Negative impacts

of the crisis in the Albanian economy have been and continue to be in different dimensions. This

financial crisis contaminated every country including developed countries or developing one. In this

section of this paper, the impact of the crisis on the Albania banking system is shown.

As mentioned above, this was one of the crises that gave her first signs late in 2007 and in early 2008.

During this period, the global stock markets and financial markets began to suffer reductions in their

values reaching minimum level. These made losses incurred by many companies and financial

institutions to reach stratospheric levels within a short period of time. These losses are estimated to

have been around $ 50000 milliard. Based on current studies and also in the statistical data it can be

said that the main reason for the start of this crisis were problems in the U.S. mortgage loans.

So, the high level of NPL-s caused a lack of liquidity in the banking system and this problem was

spread like the domino effect on financial markets around the world, also significantly reducing

confidence in these financial institutions. Among the main consequences of this crisis in the world

economy we can mention the devaluation of foreign currencies of the respective countries (especially

the dollar after Euro). It gave rise to budget deficits and growing unemployment.

Despite the increasing bank of Lehman Brothers and the consequences being spread in Europe,

withdrawals of bank deposits in the fourth quarter of 2008 in Albania were somewhat surprising.

Ultimately, the banking system was steadily increasing its assets, loans and deposits and with a


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sensitive indicator of the return on assets above the level of 1%. The overall performance of the

economy was also good with a growth rate of over 6% and debt levels under control of the government.

Although Albania has modest financial institutions, this country is feeling the weight of this financial

crisis which has already taken the form of a global economic crisis. Disintegration of our country in

financial markets and the poor financial systems have served as barriers to be protected by strong initial

impact of "credit crisis”. Even though Albanians are under the effects of the crisis, but not in crisis, it

must be realized that they do not enjoy immunity and the consequences cannot be avoided. While the

banking sector is well capitalized and funded mainly by deposits of individuals. Our banking system is

characterized by a low level of lending to the economy.

Among other effects of the crisis we can mention:

Reduction of the volume of international trade.

Reduction in high rates of foreign direct investment (FDI)

Reduction of the level of lending by the banks of the second level and the reduction of remittances

from Albanian emigrants who are part of countries which are hit hard by the economic crisis.

These effects obviously influenced on banking activity:

By reducing their liquidity, then consequently lending. This led to less investment in Albania thus

creating economic crunch.

Another element of the banking crisis which influenced the banking system and finances as a whole

was "panic". People‟s fear of what is going to happen in the future was a concerning issue. So, they

postponed their spending and consumption thus reducing the liquidity of manufacturers making the

economy to enter in the recession period of business cycle.

Consumers were uncertain what is expected to happen in the days that followed. When it comes to their

savings, consumers were very sensitive. This situation stimulated panic in the Albanian market causing

withdrawals of deposits from the respective banks but relatively controlled by the banking system. So,

we can say that all the above problems negatively affected banking system by increasing suspicion in

this system. The majority of banks in Albania are with foreign capital, this capital coming from

countries worst affected by the crisis, such as Greece or Italy.


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Table 2: The weight of total assets and the weight of loans portfolio of banking system in terms of GDP

Indicators 2006 2007 2008 2009 2010 2011 2012

The total of

assets

(in mld leke)

624.3 742.9 834.1 886.3 990.6 1,120.2 1,187.9

The total of

assets / GDP

(in %)

70.8 76.8 76.7 77.5 81.0 86.1 87.9

Total of

Loans / GDP

(in %)

22.4 30.2 36.5 39.3 40.1 40.0 42.7

Source: (Bank of, Albania, The Report of Financial Stability, 2012)

Banks have given credit for investments to small businesses and medium one in order to give them the

chance to be developed further. The analysis that was done to these businesses has been very detailed

and the provision of loans was not based on collateral but on the solvency, management and investment

of these businesses. In Albania, because of high liquidity (approximately 40% of customer deposits

turn into loans) banking sector is independent from international market. Ratio of loans to deposits in

all currencies, for the entire system is increased by 1.1% reaching 54.4% level. This indicator is in

satisfactory level, but gradually rising in the last quarter of this year. If the funding of the loans in the

country would come from the parent banks or funds from international capital markets, the effect of the

crisis would be more sensitive.

The risk of the consequences of the crisis in the medium or long term period remains. Fluctuations in

stock market and general increase of some products can lead to reducing purchasing power and

solvency of borrowers. The banks have flowed abroad approximately $ 1.2 billion in deposits. Official

data show figures of growing "export" in foreign currency that banks collect from Albanians and invest

in abroad banks. NPLs increased significantly and rapidly decreasing the quality of the loan portfolio.

As a result, the profitability indicator measured RoA, worsened as a result of increased expenses for

provisions for loan losses which affected the net result of the system. The high level of loans

denominated in the foreign currency is an additional disturbance for economy, a further problem for the

banking system. Third quarter of year 2008 marks the rise of non-performing loans portfolio of the

banking system increased by 4.3% from 25.2% in the first quarter and 21.6% in the second quarter of

2008. While the indicator that measures the quality of the loan portfolio system with the ratio of

"problem loans / Total loans" was improved even though this improvement was not in significant

levels. This indicator is calculated at 4.1% from 4.3% in the second quarter. Comparability of

indicators that measure the quality of the loan portfolio in the banking system in Albania is in relatively


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good levels, compared with the general level of this indicator in the region. According to the Bank of

Albania, the NPLs result within acceptable standards. According to experts, the problem of loans will

increase because the number of loans granted during the last year has significantly increased. Banks

and banking system have been continuously privileged as a good part of their portfolio was invested in

government securities. The high interest rate of treasury bills and bonds often above deposit interest

rates with the same maturity time, did not only offer liquidity but also the best profits for banks and the

insurance company. This portfolio is 100% sure in terms of the security thus raising the level of

security of banks operating in Albania despite numerous shareholders and connections that these banks

have to European countries.

Although the level of credit in the economy has been growing from year to year, again we can say that

the level of lending remains low compared to western countries which were in the turbulence of the

recent crises. Less than 50% of deposits collected are given as loans for the economy being in this way

at a lower level compared with western countries where economies grant loans with more than 75% of

deposits collected. This low level of lending exhibits less Albanian banks to credit risk. It should be

noted that due to the low level of loans that Albanian banks have granted, they had the luxury of

selecting the best client.

Lack of liquidity is one of the negative effects of the crisis. Banking system was faced with this

phenomenon in late 2008, where as a result of the panic, the public began not only to reduce their level

of deposits but also to withdraw a portion of them. In 2008 there was a drastic decline in deposits. Lack

of liquidity poses not only risk for the banking system but also for the economy as a whole. This brings

less investment and consequently there will be a reduction in the overall level of economic

development of the country, low level of lending leading the economy to recession.

These effects mentioned above are the main ones which affected banking system because almost every

financial indicator (positive indicator of performance) of the banking system experienced significant

reduction.

There are generally two basic types of financial crises where we can mention:

Crisis of currency or exchange rates

The banking crisis and external debt crisis.

In this paper a lot of focus is given to the financial crisis which has several definitions, where the below

findings are mentioned: "Financial crisis is the situation in which the demand for money grows so fast"

or "Financial crisis refers to a situation in which financial institutions or financial assets lose their value

resulting in declining of financial institutions or non-financial institutions."


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It can be said that the banking crisis occurs when the banking system suffers from liquidity problems as

well as when banks have a high level of nonperforming loans. This may lead the bank into bankruptcy.

A bank, in crisis situation necessarily requires the assistance of the state. Generally speaking the

banking crises generally pass in two stages: in the first stage at which banks create a large number of

NPL-s but tries not to report these loans based on reasons of trust, and the second stage which has to do

with the publication, deals with these problems and requires immediate solutions for them. These crises

have existed previously but problems transmitted in the economy probably have been different. During

the years 1980 - 1995 developed countries faced 65 crises with an estimated cost of $ 250 billion.

Finally, it is important to emphasize that financial crises (banking crises) have been inevitable and

economies of different countries coped with these negative phenomena. It is valuable to learn lessons

derived from these countries in order to face less negative consequences in the future. The behavior of

each person and of the banking system as a whole is an essential element for coping and dealing with

crises. "The majority of business failures do not result from the difficult times. The failures are

attributed to the wrong management and the way how difficult times just deteriorate the situation."

6. Banks Balance

2012 – The report of nonperforming loans to total loans resulted in 22.5% in the end of 2012, from

18.8% at the end of 2011.

2013 – In the first months of 2013, non-performing loans is 24%, with a tendency towards

deterioration.

Fund – There are 1 milliard euros of loans reported with problems, where approximately 300 million of

them are considered lost.

7. Conclusion

In conclusion we can say that the effects of the crisis in Albania are felt but it did not have the same

impact as in developed countries. This comes due to the fact that Albania is not well integrated into

global financial markets. But the fact that Albania is not strongly affected by the crisis does not mean

that it will not be affected by its consequences. Among the consequences of the financial crisis in

Albania we can mention the lowering upward rates of economy, increased unemployment, currency

devaluation against foreign currencies, reduction of production and consequently that of exports, the

decline in general business activity and reduced remittances. Those directly affected the performance of

the banking system influencing the increase of the number of loans with problems, the reduced growth

rates of deposits thus causing lack of liquidity in the market and as a result significantly lowering the


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level of lending. Reduction of lending will lead to less investment in the economy, rising

unemployment and many other negative effects on our economy. Fortunately, some steps had been

undertaken which held banking system under control, but on the other hand attention should be shown

in interbank markets as well as for the economy as a whole in this period of crisis.

The particular attention should be paid to human capital. Recruitment for vacant positions in the

banking system should be made based on the ability of the worker and not on subjective factors. This

means that those who become part of the banking system must have appropriate qualifications and

experience. Control systems of the banking system continuously should not only perform periodic

controls but also 'surprise controls "(outside planning controls). So, in this moment the internal audit,

the external one as well as oversight of the Central Bank should be more cautious. If it is necessary, the

banking system must maintain liquidity and additional funding. The attention should be directed toward

immigrants, who are the main suppliers of income. The limit of security deposit should be increased, as

it has also happened in many other countries.

Finally, it should be emphasized that despite the effects of the crisis in the banking system and the

measures that have been taken or not, Albania has potential opportunities for development in this

sector. A better management of all assets and an inter-institutional functioning will make the

performance of the banking system to be constantly increasing.

8. References

Adammu, A. (2010). Social Science Reported Network. The Effects of Global Financial Crisis on

Nigerian Economy .

Adei, S. (2004). Impact of Globalization on Management: The African Perspective. Management in

Nigeria. EUROPEAN Journal of Business and Management, 39/40(21), 20-25.

Balino Tomas, U. A. (2000, June). The New World Banking Finance and Development. Finance and

Development, 41-44.

Bank of Albania. (2008). Financial System Stability in Albania for the second half of the year 2008.

Bank of Albania Statement.

Bank of Albania. (2009). The policies of monetary and financial stability - Lessons learned from the

crisis. The 8th International Conference of Bank of Albania.


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Bank of Albania. (2012). Bank of Albania, The Report of financial stability.

Bank of Albania. (2012). The Report of Financial Stability. Tirana, Albania.

Bank of Albania. (2012). The Report on Financial Stability for the last quarter of 2012.

Bank of Albania. (2012). Bank of Albania, The Report of Financial Stability.

Bank of Albania. The Annual Report.

Bank of Albania. (2008-2012). The Annual Report of Supervision.

Bank of Albania. (2008-2012). The Annual Report of Banking Supervision. Albania

Dervishi, D. (2011). Monografi-Krizat Financiare dhe modeli stress indeks.

EUROSTAT. (2013). EUROSTAT. Retrieved from EUROSTAT.

Hausler, G. (2002). The Globalization of Finance. Journal of Finance and Development, Vol. 39, 10.

IMF. (2009). The implications of the global financial crisis for low income countries.

Kadareja, A. (2012). The Conservatorism of Banks: Zgjedhje e Qellimshme apo e Detyruar prej

ngjarjeve. Bankieri Magazine, No.3.

Kadareja, A., & Meka, E. (2012). The Banking in Albania and its path toward the future. Economicus

9.

Leyshon, A. (1995). Geographies of Money and Finance. Progress in Human Geography , Vol. 19 (1),

531.

Misnky, H. (1995, 29 March). Longer Waves in Financial Relations: Financial Factors in the More

Severe Depressions II. Journal of Economic Issues, 83 – 95.

Mishkin, F. Financial crises and aggregate economic activity. In F. Mishkin, Money Banking and

Financial Institutions, 203-205.

Okeke, M. N. (2010, Jan/Mar). Meeting the Challenges of Globalization. A Focus on Scarlite Industries

Limited. The Certified National Accountant, 18, 39.


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Pettifor, A. (2003). World Socialist Web Site.

Sanusi, L. S. (2010). Global Financial Meltdown and the Reforms in the Nigerian Banking Sector.

Paper presented at Abubakar Tafawa Balewa University.

Stiglitz, J. (2010). Interpreting the causes of the Great Recession of 2008. Eight Bis Annual

Conference.

World Bank. (2008). Global Financial Crisis and implications for the developing countries.

9. Abbreviations

ECB - European Central Bank

IMF - International Monetary Fund

NPLs - Non Performing Loans

USA - United States of America


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Is the Republic of Macedonia “Good Lover”? Republic of Macedonia-NATO-EU Case Study

Biljana Chavkoska

FON University

Macedonia

[email protected]

Citation: Chavkoska, B. (2014). Is the Republic of Macedonia “Good Lover”? Republic of Macedonia-NATO-EU Case

Study. Journal of Social and Business Studies, 1(1), 29-41.

Article History




Abstract

Republic of Macedonia has leaved 20 years of its independence and still steps forward

realization of its goals: the memberships of NATO and EU. This road was full of

impediments created by political influences by the stronger political partners on the

international scene. One of the most important events in the recent Macedonian history

was signing of the Ohrid framework agreement which put an end to the ethnic conflict

in 2001 and the name dispute with the neighbor Greece. This article aims to analyze the

role of politics versus law in the case of the NATO membership, such as the

implications that this precedent has on the EU membership. In this direction, the author

gives personal opinions and suggestions for improving the future perspectives of

Republic of Macedonia in the love triangle RM-NATO-EU. The final conclusions in the

paper go in benefit of the politics in international relations vis a vis international law.

Thus, Republic of Macedonia has to improve the foreign policy and in the near future

resolve the name issue with Greece on the road to NATO and EU.

Keywords: Independence; Membership; Politics; Law; NATO; EU

JEL Classification: F51 F52

Biljana Chavkoska Journal of Social and Business Studies

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1. Introduction

Republic of Macedonia after its independence in 1991 began to walk on the road towards membership

in international organizations such as United Nations, Council of Europe, North Atlantic Treaty

Organization and European Union. Due to the name dispute with Greece, Republic of Macedonia faced

double standard procedures for membership in international organizations.

First it was the precedent with the United Nation membership under the temporary name the Former

Yugoslav Republic of Macedonia when the country had to fulfill additional criteria. After signing the

Interim Accord with Greece, the country intensified its relation with North Atlantic Treaty

Organization and European Union. It was the first country of the region that signed the Stabilization

and Association Agreement with European Community and the Member States. Twenty years later,

Republic of Macedonia is still facing the challenges of becoming member of European family. Could

the things look differently?

2. Why NATO?

In the time when the world face the ending of the most destroyable war, part of the states who

participate decided to give new dimension to the international relations. Thus, North Atlantic Treaty

Organization or NATO was created with the Treaty of Washington signed in 1949 as a result of the

outcomes of the World War II. This Organization was created with a single aim to achieve permanent

peace and stability in the world based on article 51 of the UN Charter. The number of member states,

through the years, aroused from 12 to the current 26 member states which confirmed the on-going and

dynamic process of NATO enlargement. The first round of enlargement was in 1952 when Greece and

Turkey entered the Alliance thus stabilizing the Southeast part of Europe. Three years later in 1955

Socialistic Republic of Germany became part of NATO and in 1982 this round of enlargement ended

with Spain.

With the fall of the Berlin wall and the dissolution of the Soviet Union after the Cold war, NATO was

prepared to accept new arising democracies thus with its structures guarantying the security and

freedom. For this purpose, in 1994 NATO prepared a special program Partnership for Peace for the

new candidate countries coming from ex-Soviet union or ex-Yugoslavia. This Partnership indicates

that the end of the Cold War era created unique opportunity for stabilizing the Euro-Atlantic area with

the further NATO enlargement with the new democracies. The entering of post communistic countries

in NATO in March 1999 was limited to three countries- the Chex Republic, Poland, Hungary. Seven

countries - Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia and Slovenia - formally became

NATO members on 29 March 2004 with all the benefits and responsibilities that Alliance membership


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entails. The enlargement of the Alliance extends the zone of security and stability in Europe and brings

around 45 million more European citizens under NATO's protective umbrella. The fifth round of

NATO enlargement is by far the largest, involving as many countries as in all four previous rounds. In

the words of NATO Secretary General Jaap de Hoop Scheffer: "It will be a major step towards a long-

standing NATO objective: a Europe free, united and secure in peace, democracy and common values."

(Scheffer, NATO, n.d.).

Since 1999, all of these countries have benefited from intensified cooperation under the Membership

Action Plan (MAP), a program for advice, assistance and practical support designed to help the

countries wishing to join the Alliance to meet NATO standards. All Western Balkans countries acceded

to this initiative program-Albania in 1994, Macedonia in 1995, Croatia in 2000, Bosnia and

Herzegovina, Serbia and Montenegro in 2006. Through the Partnership for Peace, the Western Balkans

states have an opportunity to enhance the stability and prosperity of the region. The Declaration

adopted at Riga summit states: “We welcome the efforts of Albania, Croatia, and the former Yugoslav

Republic of Macedonia to prepare themselves for the responsibilities and obligations of membership.

We commend their increasing contributions to international peacekeeping and security operations as

well as their common efforts to advance regional cooperation. At our next summit in 2008, the

Alliance intends to extend further invitations to those countries meeting NATO‟s performance based

standards and are able to contribute to Euro-Atlantic security and stability” (Declaration, 2006). At the

Bucharest Summit, NATO extended the invitation to Albania and Croatia for accession and postponed

the invitation to Republic of Macedonia due to a name dispute with Greece.

The Enlargement process of NATO Organization is based on article 10 of the Washington Treaty

explicitly stating: “Every European country in position to follow the principles entailed in the Treaty

and to stability of the North Atlantic area may become equal member state of NATO Alliance. Any

state so invited may become a party to the Treaty by depositing its instrument of accession with the

Government of the United States of America. The Government of the United States of America will

inform each of the Parties of the deposit of each such instrument of accession”.

In interpreting the meaning of article 10 of Washington Treaty two important elements can be

identified:

1) the European country should follow the principles enshrined in Washington treaty

2) the country should improve the security of North Atlantic area


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3. What was Achieved?

Due to the name dispute with the south neighbor Greece, Republic of Macedonia intensified its relation

with NATO after the signing of Interim Accord in 1995. Till the Bucharest Summit in 2008, Republic

of Macedonia made important reforms and took activities on its road to NATO. In regard to the first

element of the article 10 of the Washington treaty, Republic of Macedonia confirmed the ability to

follow the principles enshrined in the Treaty.

Table 1: What exactly Republic of Macedonia did to follow the NATO principles?

15.11.1995 Republic of Macedonia and NATO Alliance started the cooperation in the Partnership

for Peace thus Republic of Macedonia becomes member of the North Atlantic

Cooperation Council which over the years transforms in the Euro-Atlantic Partnership

Council. Republic of Macedonia commits its participation in the Partnership for

Peace through an annual Individual Partnership Program;

1999 Republic of Macedonia was important partner in the NATO led operation in

Yugoslavia in 1999 and also took an important role in facilitation of the refugee crises

followed after the operation. For many years, Republic of Macedonia has been

providing host nation support to troops of the Kosovo Force (KFOR) transiting the

country regulated with an Agreement for the status of the KFOR on the territory of the

Republic of Macedonia

1999 Part of the Membership Action Plan from 1999 with aspiration for joining the

Alliance. The Membership Action Plan is practical manifestation of the NATO

politics of “open door” of the enlargement process such as the commitment of the

candidate country to follow the principles of the Organization. The key element of the

Membership Action Plan is the Annual National Program for Membership (ANP)

dedicate to political, economic security and law aspects of the preparation for

membership.

Republic of Macedonia and NATO actively cooperate in many areas with special

emphasis of the defense and reforms of the security system, democracy and

institutional reforms;

Source: Georgievski S. Dodevski S., Documents for Republic of Macedonia 1990-2005, Law Faculty, Skopje, 2008, p 819-

832

From the facts stipulated above, Republic of Macedonia de facto confirmed the obligation of the

country to follow the principles enshrined in the Washington Treaty.

In regard to the second element of the Article 10 of the Washington Treaty, Republic of Macedonia

participated in achieving the peace and stability.


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4. What Exactly Republic of Macedonia Did in Achieving the World Peace and Stability?

In the following table (Table 2), several arguments confirming that Republic of Macedonia influenced

keeping the world peace and stability will be stated.

Table 2: Arguments that Macedonia contribute to keeping world peace and stability

2005 Republic of Macedonia contributed to the International Security Assistance Force

(ISAF) in Afghanistan. A further combined medical team, formed by the three MAP

countries, was deployed in support of ISAF in August 2005. The country is in the

process of significantly increasing its contribution to ISAF.

2003-2008 The contribution in the operation of NATO Training mission in Iraq focusing on

training and mentoring not combating.

Ohrid,

2007

Republic of Macedonia was a host country to the Euro-Atlantic Partnership Council

Security Forum which brought together ministers, senior officials, parliamentarians,

academics, NGOs and journalists from the NATO member states and partner

countries for informal discussions on key security issues. The need for a

comprehensive approach to Afghanistan, a framework for energy security and the

importance of integrating the Balkans into Euro-Atlantic structures was the focus of a

special meeting in Ohrid, 28-29 June.

Thus, Republic of Macedonia fulfilled the conditions for membership of NATO and expected invitation

together with the Albania and Croatia in the next round of enlargement process.

5. What Went Wrong at Bucharest Summit?

Republic of Macedonia together with Croatia and Albania in the context of NATO enlargement process

signed the Adriatic Charter for Partnership. This Charter was strategic document aiming to integrate the

three countries mentioned above in the NATO and supported by the USA. At the Bucharest Summit it

was expected due to the fulfillment of the criteria, the countries participants in the Adriatic group to be

invited to enter the NATO. But, what went wrong for Republic of Macedonia at Bucharest Summit and

why Republic of Macedonia did not received invitation together with Albania and Croatia? In the final

Declaration of the Bucharest summit the member states agreed that: “We recognize the hard work and

the commitment demonstrated by the Former Yugoslav Republic of Macedonia to NATO values and

Alliance operations. We commend them for their efforts to build a multi-ethnic society. Within the

framework of the UN, many actors have worked hard to resolve the name issue, but the Alliance has

noted with regret that these talks have not produced a successful outcome. Therefore we agreed that an

invitation to the Former Yugoslav Republic of Macedonia will be extended as soon as a mutually

acceptable solution to the name issue has been reached. We encourage the negotiations to be resumed

without delay and expect them to be concluded as soon as possible” (NATO, 2008).


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According to this warding of the final conclusions of Bucharest Summit, the invitation for membership

was extended until Greece also agrees with other member states to invite the country in NATO. The

major question that arose after the Bucharest Summit was did or did not Greece veto the membership

of Republic of Macedonia in NATO and can the country appeal Greece for violation of the Interim

Accord signed in 1995? In regard to the first question, when Bucharest summit ended and Republic of

Macedonia did not get an invitation for membership together with Croatia and Albania, it was evident

that hard time is coming. First, Macedonian population was frustrated because the name dispute with

Greece became formal criteria for membership even though Republic of Macedonia fulfilled the

criteria stipulated in article 10 of the Washington Treaty. Republic of Macedonia did not get invitation

for membership because of the objection of one of the member states of NATO. This situation raised

the question is the principle of consensus still valuable when the candidate country has fulfilled the

criteria for membership. The Bucharest Summit seriously put in question the open door enlargement

process of NATO. The principle of open door was introduced to support new rising democracies and to

improve the security in the traditional zone (Elenovski, n.d.).

Still, Republic of Macedonia partly neglect the additional criteria for membership stipulated in the

Membership Action Plan. These criteria include: functioning of the democratic political system based

on market economy, respect of the minority rights in accordance with OBSE guidelines, solving the

disputes with neighbors, fighting corruption and organized crime and military support of the Alliance.

Thus, Greece used the criteria for regional stability and cooperation to put on her side the important

influence of France, Spain and Hungary. The decision to postpone the invitation for Republic of

Macedonia was a result of the political game of the important players on the international scene. For

example, France agreed to send 1100 soldiers in Afghanistan as a support for NATO led operations,

thus joining and supporting the United States of America in this operation. Also, France decided to sign

a contract for sale and purchase of military weapon with Greece costing 4 million dollars.

In regard to the second question, Republic of Macedonia (in official document The Former Yugoslav

Republic of Macedonia) decided to institute proceeding against Greece for violation of article 11 of

Interim Accord signed 13 September 1995. In the appeal, Republic of Macedonia requests the “Court

to order Greece to immediately take all necessary steps to comply with its obligation under article 11,

paragraph 1” and “to cease and desist from objecting in any way, whether directly or indirectly, to the

Applicants membership of the North Atlantic Treaty Organization and/or of any other international,

multilateral and regional organizations and institutions of which Greece is member” (International

Court of Justice, 2008).


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International Court of Justice reached the verdict in the case in the end of the 2011. The verdict of

International Court of Justice is final and cannot be a subject of appeal by the states. After the verdict

is reached the parties are only eligible to ask a) interpretation of the verdict, if the parties don‟t agree

over its meaning or b) if the parties discover some fact of such a nature as to be a decisive factor, which

fact was, when the judgment was given, unknown to the Court and also to the party claiming revision,

always provided that such ignorance was not due to negligence (Frckoski, Tupurkovski, & Ortakovski,

1995).

The verdict of the Court has no binding force except between the parties and in respect of that

particular case. If the Court rules that Greece violate the Interim Accord still it would not mean that

Greece would be force to agree that Republic of Macedonia enters NATO under the temporary name

The Former Yugoslav Republic of Macedonia due to the principle of consensus. The verdict would

have declaratory nature of deciding if Greece violated the article 11 of Interim Accord. But if the Court

rules that Greece violate the article 11 of Interim Accord, it would increase the influence and support

for the Republic of Macedonia on the international scene. It would also increase the international

pressure on Greece to solve the name dispute with Republic of Macedonia and thus would week its

diplomatic position. Solving the name dispute is important for the both states and for the regional

stability and prosperity. It is crucial for the continuing of the euro Atlantic integration of the Republic

of Macedonia.

Every country which violates the obligation under the international law by acting or failure to act and

thus makes damage to other state or international organization is obligate to restitute the damage

(Frckovski, Ortakovski , & Tupurkovski, 1995). Article 1 of the Articles on responsibility of states for

international wrongful acts adopted by the International Law Commission at its 53 session on 3 august

2001 states that “Every internationally wrongful act of a state entails the international responsibilities

of that state” such as article 31 stating that “1. The responsible State is under an obligation to make full

reparation for the injury caused by the internationally wrongful act 2. Injury includes any damage,

whether material or moral, caused by the internationally wrongful act of a State.” (International Law

Comission at 53rd session, 2001). Thus, Republic of Greece under the international law is obligate to

compensate if the International Court of Justice rules that Greece violate the Interim Accord. In the

International law there are several forms of reparation: Restitutio in integrum, money reparation,

satisfaction especially in the nonmaterial damages meaning officially apologies, formally accepting the

wrongful act, responsibility of state leaders (Frckovski, Ortakovski, & Tupurkovski, 1995).

In regard to the NATO membership this would not change the factual situation that the invitation for

membership for Republic of Macedonia is postponed until Greece agree with other member states to

invite the country to join the Union.


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The NATO Summit in Bucharest just confirmed the Thucydides thesis that “The strong do what they

want and the week what they must”. Having in mind that Greece is member state of NATO and EU it

would be difficult for Republic of Macedonia to become member of NATO or EU without solving the

name dispute. Greece also could bloke the EU membership of the neighboring country. So, there are

two possible directions as a final decision for the situation. The first solution is that Republic of

Macedonia despite the fulfillment of the formal criteria would have to solve the name dispute with

Greece as soon as possible and the second is serious debate for the decision procedure for membership

of the country applicant (the principle of consensus) especially in the situation when all formally

required condition for membership are fulfilled. In the situation when the functioning of the principle

of consensus is hardly applicable, every member state could practice its ability to bloke candidate state

such as the case of Republic of Macedonia. In this new constellation of practicing interest and power,

the basic NATO criteria would still be efficient only if the principle of consensus is limited minus one

or minus two (Elenovski, n.d.).

6. First NATO than EU or the Other Way Around?

With the fall of the Berlin wall and the dissolution of Socialistic Federative Republic of Yugoslavia,

European Union created new form of cooperation with the countries from Southeast Europe and West

Balkan countries. The European Union created its own institutional framework for support of the

transition process of the new rising democracies. In June 1999 European Union announced new form

of legal binding with third countries as Stabilization and Association Agreements in compliance with

the widen process of stabilization and association (Petrushevska, n.d.). This process was based on the

necessary changes of the country focusing in general of the rule of law, stability of political institutions,

and free market economy as a precondition for EU membership.

Republic of Macedonia after the independence in 1991, because of the name dispute with Greece,

named its own representative in the headquarters in Brussels in October 1992. Still, the complete

diplomatic relations were realized in December 1995, when Republic of Macedonia opened the mission

in European Union. In April 1997 Republic of Macedonia signed the Agreement for Cooperation with

European Community, such as the agreement for cooperation in the transport and textile. The same

year, the permanent mission of the European Commission in Republic of Macedonia was opened. In

the period from April-November 2000 Republic of Macedonia negotiate for the Stabilization and

Association Agreement. The text of the Stabilization and Association Agreement was approved on the

Summit of the heads of the states and governments of the Member States of the Union held in Zagreb

on 24.11.2000 (COM, 1999). The Agreement was signed in Luxemburg on 9 April 2001 which ended

the negotiating process.


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Stabilization and Association Agreement entered into force on 1 April 2004 after the ratification of all

Member States in the European Union. Republic of Macedonia was the first country from the region

that signed the Stabilization and Association Agreement and clearly focused its path on the road to

European integration. In the period until the Stabilization and Association agreement entered into force,

the Temporary agreement had a legal effect signed on 1 June 2001 (Georgievski, 2004).

One of the most important chapters of Stabilization and Association agreement relating the EU

membership for the Western Balkan countries is the Chapter regulating the regional stability and

cooperation as an additional criteria. Interpreting this term regional stability would mean that Republic

of Greece would invoke Republic of Macedonia to solve the name dispute in regard the integration into

the European Union. This regional stability was clearly defined by the European Union on the

European Council meeting in Köln in April 1997 (Taskovska, 2004).

If we analyze the EU enlargement in 2004 and 2007 when 12 new Member States entered the European

Union it is evident that first this countries became member states of NATO. For the post communistic

countries, the membership in NATO precede the EU membership, thus guaranteeing the fulfillment of

the political criteria (Gotron, 2006). Then the procedure for EU membership continuous by fulfillment

of the economic and law criteria stipulated in Copenhagen in 1993. So, it can be expected that

Republic of Macedonia first enters into NATO thus completing the political criteria and then

continuous its road to EU in fulfilling the law and economic criteria stipulated in Copenhagen. The

NATO membership of the Republic of Macedonia would mean long-term stability and security not

only for the Balkans, but also for the Euro-Atlantic region on the whole and so the commencement of

the finalization of the concept for a Europe, whole, free, and in peace.

The integration of the Republic of Macedonia into NATO is a subsequent challenge for EU integration

of the country. Thus, there is no alternative for Republic of Macedonia except integration in NATO and

EU. The membership in NATO and EU would increase the foreign investments in the country,

multinational companies and middle and small investors. The entrance of the post-Soviet countries in

NATO and EU confirmed the fast economic development and new job vacancies (Miloshoski, n.d.).

NATO enlargement is always one step ahead EU enlargement. If a state succeeds in joining NATO,

certain norms and values have been set and achieved also applicable for EU membership. Greece

already announced that it would veto the EU accession of Macedonia if the name dispute is not

resolved by that time (Jese, n.d.).

The European Union played important role in facilitating the Ohrid negotiation process when the

Framework Agreement was reached to put an end to the conflict. In four years of formal


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implementation, the Macedonian parliament adopted 15 constitutional amendments and 70 new or

revised laws, making the Agreement the founding document of contemporary Macedonia (Savkovich

& Petrovich, n.d.).

Republic of Macedonia was first country of the region to sign Stabilization and Association Agreement

but is still the only country which no accession negotiations have taken place to date. Croatia instead

accelerates the integration process towards EU even though it was the country which signed the

Stabilization and Association Agreement after the Republic of Macedonia. Today, Croatia is full

member of the European Union. Republic of Macedonia expects to start the negotiations. This situation

is a result of a several reasons: Firstly, due to a name dispute with Greece, Republic of Macedonia did

not get an invitation for NATO membership, thus the reforms towards EU slowed down. EU besides

the implementation of the SAA, entailed eight benchmarks or key areas to reform: dialogue between

political parties, implementation of the law on police and anti-corruption legislation, reform of the

judiciary and public administration, such as measures in employment policy and enhancing the

business environment (Europa.eu, 2008).

In 2007 European Community signed an agreement for visa affiliation with Albania, Bosnia and

Herzegovina, Republic of Macedonia, Montenegro, and Serbia. These agreements aimed to facilitate

the visa issuing for short term residence for the citizens of Republic of Macedonia in compliance with

the candidate status and Stabilization and Association Agreement. Republic of Macedonia was the

country with the biggest achievements in the region. Republic of Macedonia signed the Readmission

Agreement with the European Community and the Member States, thus in the period from 01.01.2008

till 30.09.2008, 508 people were send back in the country according to the Readmission Agreement.

The Council of ministers for internal affairs and justice on the meeting in Brussels agreed to adopt

decision for eliminating the Schengen visa barriers for Republic of Macedonia, Montenegro and Serbia

starting from 19.12.2009. The European Commission suggests visa liberalization for one or more

countries to the Council of ministers who acts with 2/3 majority. Then, European Parliament and the

Commission for justice and internal affairs and ministers for foreign policy must comply with the

decision. The final decision was the amendment of the Regulative 539/2001 by the Council of

ministers. In this process, Republic of Macedonia was put in the group with Serbia and Montenegro

even though the country finished the necessary reforms much earlier. Thus, the Republic of Macedonia

was regionalized which can be seen as a step backwards approximation of the EU. Republic of

Macedonia additionally after visa liberalization did not took subsequent measures to explain to its

citizen the real meaning of the visa liberalization and the freedom of movement of citizens, students,

workers, retired person, assailants. This resulted in increased number of Macedonian assailants who left

the country due to the visa liberalization and applied for this status in one of the member states of the


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Union particularly in Belgium. Unfortunately, this raised the question of violence of visa liberalization

regime and introducing restrictive measures towards Macedonian citizens and the freedom of

movement in EU member states. For European Union, increased number of Macedonian appliers for

assail meant that Macedonian institutions are not prepare to control the visa liberalization. Thus, the

skepticism in EU increased over the question of readiness of the Republic of Macedonia to move

forward EU integration. Republic of Macedonia must work hard to eliminate the picture of being “bad

lover” that was created after the problems with the visa liberalization arose. Republic of Macedonia has

no time to lose in improving the picture and damage that already is done. For that purpose the Ministry

for internal affairs intensified the border controls, the controls over agencies for transporting people

and litigate procedures against citizens who act contrary of the EU visa liberalization rules. The

government suggested legislative amendments of the criminal law thus incriminating the abuse of the

visa liberalization regime with the EU member states and signatories of the Schengen Agreement.

7. Conclusion

Republic of Macedonia lives 20 years of its independence full with impediments and challenges. The

biggest temptation in its existence was when the country entered the United Nation under the

temporary name The Former Yugoslav Republic of Macedonia because of the name dispute with the

south neighbor Greece. Fifteen years later in 2008 in regard to the NATO membership the identical

situation repeat again thus Greece confirmed that the stronger and influential countries have the final

role in the international scene. In the present moment, Republic of Macedonia is facing the challenge

of the verdict of the International Court of Justice in the case against Greece, solving the name dispute

with Greece as a condition for NATO and EU membership and accelerating the reform process in

regard EU integration. After the Bucharest Summit, the state institutions of the country were not

motivated because of the last events so were not prepared to follow the visa liberalization difficulties

and certain problems arose. The outcome was raising the EU skepticism towards the deepening of the

country integration process and starting the negotiation for membership. Republic of Macedonia and its

institutions must in future time to be completely prepared for every phase of integration as a step

towards not backwards. Finally, solving the name dispute is the key of the NATO and EU membership

of the country and condition sine qua non for regional stability and security, increasing the foreign

investments, lowering the unemployment rate and growth and development of the country. This was

the case with the last NATO and EU enlargement with the South East European countries and it is

imperative for Republic of Macedonia. Republic of Macedonia must improve the status of bad lover in

international scene in relation with other countries such as the relation with international organization

particularly the NATO and EU. This can be only done by completing the reforms in all EU chapters

and strengthening the relation with NATO. It is very important all political parties in Republic of


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40

Macedonia to unify in the solving of every challenge that Republic of Macedonia is facing in the

moment or would face in the future time on its way to NATO and EU.

8. References

Blinsky Yaroslav. (1999). Endgame in NATO Enlargment: The Baltic States and Ukraine. Praeger.

COM. (1999). Report from the Commission on the Feasibility of Negotiating a Stabilization and

Association Agreement with the former Yugoslav Republic of Macedonia. Brusels.

Declaration, R. S. (2006). Retrieved 08 31, 2011, from www.nato.int.

Elenovski, L. (n.d.). Macedonia and NATO after Bucharest. Political Thought(6), 63.

Europa.eu. (2008, 03 05). Retrieved from www.europa.eu:

http://europa.eu/legislation_summaries/enlargement/western_balkans/e50028_en.htm

Frckoski, L., Tupurkovski, V., & Ortakovski, V. (1995). International Public Law. Tebernakul.

Frckovski, L., Ortakovski , V., & Tupurkovski, V. (1995). International Public Law. Tebernakul.

Frckovski, L., Ortakovski, V., & Tupurkovski, V. (1995). International Public Law. Tebernakul.

Georgievski, S. (2004). "Reflection on the EU rules in the Macedonian legal order" in Macedonian

French days of law - 200 years Code Civil. Prosvetno delo, 296.

Georgievski, S., & Dodevski, S. (2008). Documents for Republic of Macedonia 1990-2005. Law

Faculty, Skopje.

Gotron, Z. (2006). European Law, Kongresen servisen centar. Skopje: DOO.

International Court of Justice. (2008, 11 17). Press Release.

International Law Comission at 53rd session. (2001, 08 03). Retrieved from

http://untreaty.un.org/ilc/texts/instruments/english/draft%20articles/9_6_2001.pdf

Jese, A. (n.d.). Integration into Euro-Atlantic Structures: A key to regional stability. Political

Thought(22), 65-67.

Miloshoski, A. (n.d.). Macedonian perspectives and challenges. Political Thought(22), 59.

http://www.europa.eu/


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NATO. (2008, 04 03). Official texts. Retrieved from www.nato.int:

http://www.nato.int/cps/en/natolive/official_texts_8443.htm

NATO Enlargment: Illusion and Reality (Cato Institute Publisher Edition). (1998).

Petrushevska, T. (n.d.). The legal effect of European treaties. Jurist (89), 6-7.

Reflecting NATO Enlargement 2004 and Subsequent Relations with the EU (Kindle Edition ed.).

(2011). Glenn Segell Publisher.

Ruzin, N. (2005). NATO in front of the new challenges and the perspectives of Republic of Macedonia.

Fondation Fridrih Ebert, Skopje.

Savkovich, M., & Petrovich, J. (n.d.). No carrot, why Comply? Political Thought(22), 74.

Scheffer, J. d. (n.d.). Retrieved from NATO:

http://www.nato.int/docu/enlargement/html_en/enlargement01.html

Taskovska, D. (2004). The sun remains a sun. Law faculty, Iustinianus Primus, 57-58.

http://www.nato.int/


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Vol. 1(1) / pp. 42-54


42

Creating Value Added for Leasing Service Customers: Case Study of VB Leasing Bosnia and Herzegovina

Slobodan Vujić

VB Leasing BH


[email protected]

Saša Vujić

University “Vitez” Travnik


[email protected]

Aida Abduzaimović



[email protected]

Ibrahim Obhodaš



[email protected]

Citation: Vujić, S., Vujić, S., Abduzaimović, A., & Obhodaš, I. (2014). Creating Value Added for Leasing Service Customers: Case

Study of VB Leasing Bosnia and Herzegovina. Journal of Social and Business Studies, 1(1), 42-54.

Abstract

The leasing company's goal is to develop and maintain its client relations through creating the leasing service

customer value added, and thus achieve increased business efficiency and an increase in its market share. The

purpose of this study is to analyze the process of creating the customer value added in area of leasing services, as

well as to determine what value added indicates for leasing product customers. In this study advantages and

disadvantages of the leasing package, both from economic and financial aspect of leasing will be presented.

Leasing package development is based on the mutual economic interest of both lessor and lessee. The financial

basis of leasing is financing, i.e. acquisition of given goods without engaging one's own capital and without

entering a classic loan-based relationship. The paper will also discuss types of leasing that are the most frequent in

Bosnia and Herzegovina market. This study will also analyze the present customer satisfaction and their

perceptions about the importance of individual factors affecting customer experience with leasing company. Data

for this study was collected through questionnaires with close ended questions based on the Likert scale from one

to five. Survey was comprised of two parts: the importance of individual elements in dealing with a leasing

company and the present customer satisfactions in dealing with a leasing company. Each part will comprise five

elements. The respondents were requested to rank each element according to its importance in their dealing with a

leasing company. 500 questionnaires were distributed among leasing customers, legal and private persons in

Bosnia and Herzegovina. The research will provide an insight into what affects the creation of the leasing service

customer value added, and how it is reflected on the company's market share.

Keywords: Operational Leasing; Financial Leasing; Service; Customer Value Added; Customer Satisfaction.

JEL Classification: M31, M310

Article History





Vujić, S., Vujić, S., Abduzaimović, A., & Obhodaš, I. Journal of Social and Business Studies

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1. Introduction

Across the world, leasing business has been well known for years, while in B&H it has been

developing only over the last seven to eight years. In the Federation of B&H, leasing company business

is regulated by the Law on Leasing, which entered into force in 2009. The first specialized leasing

company was established in the USA, in 1952, while Europe saw their development a dozen years later

than the USA. „From the economic viewpoint, leasing is a special financing technique, which has

developed into a fairly strong business activity over the past thirty years. Leasing as a financing

mechanism implies trade in products where a customer buys the right to use a given product by paying

a defined periodical price. It is actually a rent, i.e. leasing is a form of renting a given product. The

objects of rent may include technological equipment, machinery, medium-term assets, and different

types of durable consumer goods.”(Backović, 1997, p.278)

There are two basic types of leasing: operating and finance (or capital) leasing. In the operating leasing,

the ownership right over the object of lease is not conveyed. The lessee chooses the object of leasing

himself, and pays the contracted amount for its use to the leasing company. Upon the expiration of the

contracted term of lease, the lessee returns the given asset (car, machine, piece of equipment, etc.) to

the lessor, and the latter can sell it or lease it again in accordance with the remaining service value of

the asset. In the finance lease, the contract provides for gaining ownership over the object of the lease,

though only upon the expiration of the contracted term. The lessee pays monthly installments, and

records the asset on the asset side in its balance sheet, and calculates depreciation on it. The lessor

retains the ownership right over the asset until the last installment, which is the basic guarantee for

paying all the installments.

2. Economic and Financial Bases of Leasing

Leasing is an English word and means renting, letting, granting temporary possession in exchange for

rent. Essentially, the lessee independently chooses the object of lease, which the lessor purchases and

pays for, and grants, to the lessee, the temporary use of it for an agreed-upon period and for a defined

compensation. It implies the distinction between ownership over the asset (the leasing company

remains its owner) and its use (it is used by the lessee). In this way, the asset user utilizes it without

spending its own funds for the acquisition and without gaining ownership over the asset.


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2.1. Economic aspect of leasing

The development of leasing package is based on the mutual economic interest of both lessor and lessee.

In essence, it makes it easier for the lessee to acquire the desired equipment that they are unable to pay

for in advance. They obtain the equipment and pay for it within the period of its use. Since it typically

implies the acquisition of costly production equipment, the lessee plans to pay for the equipment out of

the income they gain by its use. If the lease involves a private person, it makes it easier for them to

secure part of funds for its payment over a longer period of time than to secure all the funds in advance

when purchasing it.

Leasing can be defined as a contractual relationship between two parties, the user and the owner of the

assets that form the object of leasing package, whereby the user gains the right to use the assets and in

the same time takes the obligation to make a number of periodical payments to the owner, i.e. the

leasing company, within the leasing period.

In 2012 and 2013, economic trends in the surroundings had a negative impact on local economy,

through the debt crisis overflow from the Eurozone and the region. It resulted in the trend of local

demand weakening, which has been present since 2010, and which has slowed down leasing

companies‟ business activities as well. The crisis impact on the real sector is evident, and the

consequences will inevitably be reflected on the economic environment the leasing companies do

business in over the forthcoming period as well. It also affected the bottom line of leasing companies in

the Federation of B&H which, as of 30/09/2013 amounted to 626.037 thousand KM, which is in turn

by 9.84% or by 68.327 thousand KM lower compared to 31/12/2012. The former amount of assets

refers to six leasing companies, while as of 31/12/2013, the total amount of assets referred to seven

leasing companies (one leasing company was revoked the license for leasing activities).1

1 Data provided by BANKING AGENCY OF THE FEDERATION OF BOSNIA AND HERZEGOVINA „Informacija o

sektoru lizinga Federacije BiH“, Sarajevo, November 2013


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Graph 1: Market share by volume (in 000 KM) – BH Leasing market 2004 – 2013

Source: Author’s own creation based on data by Banking Agency of FB&H

Table 1: Leasing market in B&H by financial volume

TOTAL FIN.VOL. IN1000 € 2012 2013 RATE +/- 2013/2012

VEHICLES 79.273,00 71.178,00 -10,21% EQUIPMENT 26.247,00 20.734,00 -21,00% REAL ESTATE 6.140,00 1.538,00 -74,95% OTHER 0,00 0,00 0,00%

TOTAL 111.660,00 93.450,00 -16,31%

TOTAL WITHOUT REAL

ESTATE 105.520,00 91.912,00 -12,90%


Table 2: Leasing market in B&H by the number of contracts

NUMBER OF CONTRACTS 2012 2013 RATE +/- 2013/2012

VEHICLES 4.646,00 3.804,00 -18,20% EQUIPMENT 882,00 490,00 -44,44% REAL ESTATE 62,00 12,00 -80,65% OTHER 0,00 0,00 0,00%

TOTAL 5.590,00 4.306,00 -22,97%

TOTAL WITHOUT REAL

ESTATE 5.528,00 4.294,00 -22,32%



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Graph 2: Structure of B&H leasing market in 2013

Source: Author’s own creation based on data by the Association of Leasing Companies of B&H

Economic advantages of leasing are expressed through:

creating and increasing trade in leasing services,

employing the leasing company‟s capacity,

labor employment,

creating profit and satisfying interests of owners and investors in the leasing company,

maintaining the lessee‟s credit rating,

higher return-on-capital rate,

faster company‟s development,

increased technological development of the lessee,

depreciation calculation.

However, it is necessary to point to the disadvantages of leasing from the economic aspect. The basic

disadvantage of any leasing package is that it is more expensive than a bank loan.

Financial aspect of leasing

The financial basis of leasing involves financing of given assets acquisition without engaging one‟s

own capital and without entering a classic loan relationship.


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“If a future renter, i.e. lessee does not have a sufficient amount of their own resources or if for some

reason they cannot enter a loan relationship or if they need their own capital for some other needs, they

negotiate the price, term of delivery and other significant related elements with the equipment supplier.

Thereupon, they find a financier (a leasing company or bank that is professionally involved in leasing),

which purchases the equipment for the lessee from the supplier and then grant, to the lessee, its use

through a leasing contract. The entire business operation proceeds in a triangle, with two separate

contractual relationships, as follows: the contract on equipment sales to the lessor between the supplier

and leasing company, and the contract between the leasing company and lessee on renting the

equipment. In this respect, one should have in mind that the object of lease is delivered to the lessee

directly by the manufacturer, i.e. the supplier of the given object of lease.” (Backović, 1997, p. 279)

From the financial aspect, leasing allows the following advantages for the lessee:

A simpler way of obtaining funds for the equipment acquisition. The procedure of applying for and

granting the lease is constantly being made shorter compared to that in banks;

A simplified way of providing guarantee for payment. The object of lease is the instrument of

guaranteeing;

Faster processing of applications for lease compared to bank loans;

Better companies‟ liquidity. When using a lease, the lessee does not engage their own funds, which

in turn allows them to use the existing funds for working purposes and thus increase the company‟s

liquidity;

Tax exemptions.

3. Process of Creating Value Added For Leasing Service Customers

Theoretical bases of satisfaction start from the individual‟s subjective estimate as to whether they are

satisfied with a product or service or not compared to their expectation. “Generally, satisfaction is the

feeling of a person‟s satisfaction or disappointment resulting from the comparison between the

perceived effect (or result) of a product and the expectation. If the effect is smaller than the

expectation, the customer is dissatisfied. If, on the other hand, the effect has met their expectation, the

customer is satisfied. If the effect exceeds expectations, the customer is very satisfied or

delighted.”(Kotler and Keller, 2006, p.144)

In case of the leasing service, the customer satisfaction is accumulated. In the first stage, the customer

defines satisfaction with obtaining the leasing package. They assess and consider expectations in the

process of negotiating the leasing package with actual implementation, and can be more or less

satisfied with it. However, the very process of leasing package is related to the second stage of


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satisfaction, i.e. obtaining the equipment and results of its performance. Although the two processes are

separated (obtaining the leasing package and equipment selection), the customer is significantly

relating the two since they are actually a closely tied process. If the customer is successfully

implementing the leasing package and profitably using the equipment they acquired through the lease,

it is realistic to expect that the customer will be satisfied and achieve the favorable satisfaction. In the

same time, such a customer will regularly pay installments to the leasing company. However, if it

happens that the customer is not satisfied with the equipment‟s performance even through no fault of

the leasing company‟s own, it can be expected that the customer will be less good at fulfilling their

obligations toward the leasing company, either by being late with paying installments or by having

difficulties with regular servicing of their obligations. “People form ties with companies or place them

within the framework of their perception to defined positions. Others possibly see the same companies

in a completely different light.” (Spector, 1961)

The process of creating value for customers in the area of leasing services is related to the development

of customer‟s need for possessing a given piece of machinery or equipment they need for the process of

production or a service activity and, in case of private persons, for personal use. However, the customer

has difficulties with funds needed to purchase the desired asset. In many cases, the customer does not

have a credit rating needed for acquiring the desired asset. In such a case, there is a leasing package,

which allows a fast and efficient acquisition and use of the desired asset. In this way, the customer

obtains value through using the leasing package. It allows a fast and simple way of solving the

problem. Essentially, the true value for the customer is the acquisition of the desired asset and putting it

into use, being aware that their desire was fulfilled owing to the leasing package. In this case, value for

customer is accumulated through, first, being granted the leasing service and, secondly, through

acquiring the needed asset and generating new income and profit. In this way, without the initial value,

i.e. obtaining the leasing service, values-added for customer would not be created in the first place.

“The overall value for customers is the perceived money value of the set of economic, functional and

psychological benefits that customers expect from the given supply in the market.”( Kotler and Keller,

2006, p.141) Loyalty to a single leasing company is increased with the customer‟s satisfaction with the

leasing company‟s services. Customers‟ loyalty to a given leasing company includes permanent

business relations and repeating leasing service purchases, without using another leasing company‟s

services.

This process creates and increases customer satisfaction. However, customer satisfaction is based on

the actual economic satisfaction as their business profitability is increasing. The customer assesses the

leasing package value from the aspect of what it allowed them to achieve. Since many customers,

particularly small and medium-size enterprises do not know enough of leasing package possibilities, it


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is necessary to take an active role toward them. For this reason, the traditional scheme of leasing

company organization should be transformed into a modern, customer-oriented organization.

Figure 1: Models of traditional and modern organization

Source: P. Kotler and K. Keller (2006) „Marketing menadžment“ 12 ed, translation „Data status“, Belgrade, p. 140

The modern leasing company organization should put customers on the top, and they should be

followed, by significance and importance, by front office staff, which have contacts with customers,

conduct negotiations, offer leasing packages and, if possible, fulfill customers‟ desires. Below them,

one should find middle management and back office, whose basic task is to support and serve the front

office staff, so that the latter could serve customers efficiently. At the bottom of the scheme one finds

the top management, whose task is to employ the middle management and support them in carrying out

their tasks in serving the front office staff. In the modern organization scheme, the term „customers‟

have been added to both sides indicating that, besides the front office staff, direct contacts with

customers should occasionally include the middle and top management as well. “In modern marketing

service business, a positive image is more significant compared to product marketing, since attempts

are made to transform the latter from commodity to product.” (Onkvist and Shaw, 1989)

4. Methodology

In order to identify the importance of individual factor effecting customer experience with leasing

company and present customer satisfaction primary research has been conducted.

Primary data were collected through questionnaires with close-ended questions based on Likert scale,

from 1 to 5. The questionnaire comprised two parts: importance of individual elements in dealing with


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leasing companies, and present satisfaction in dealing with leasing companies. Each part of the

questionnaire includes five elements. The respondents were asked to rank, by importance, elements that

affect the creation of leasing service value. The questionnaires were distributed to leasing users, legal

and private persons, across Bosnia and Herzegovina. A total of 500 questionnaires were distributed,

and 446 leasing users filled in and returned the questionnaires.

Leasing service research was conducted with two basic segments of service users: legal persons and

private persons respectively. It included the study of individual elements‟ importance in dealing with

leasing companies, and particularly the present satisfaction in dealing with leasing companies. We

obtained 172 responses from legal persons and 274 responses from private persons. The sample is

sufficiently representative, and the responses can be considered relevant.

4.1. Importance of individual elements in dealing with leasing companies

For the research purposes, we created two tables from the returned and filled-in questionnaires:

- Importance of individual elements in dealing with leasing companies for legal persons, and

- Importance of individual elements in dealing with leasing companies for private persons.

Both legal and private persons were asked the same questions, and responses could be graded at five

levels (unimportant, slightly important, important, very important and extremely important).

Table 3: Importance of individual elements in dealing with leasing company for legal persons

RESPONSES

TERM OF

PAYMENT

SERVICE

QUALITY

SERVICE

PRICE

(INTEREST

RATE)

NUMBER OF

GUARANTORS

GRACE

PERIOD TOTAL

NO. % NO. % NO. % NO. % NO. % NO. %

UNIMPORTANT 8 4.6% 11 6.4% 7 4.1% 4 2.3% 0 0.0% 30 3.5%

SLIGHTLY

IMPORTANT 18 10.5% 14 8.1% 8 4.6% 5 2.9% 2 1.2% 47 5.5%

IMPORTANT 25 14.5% 30 17.4% 15 8.7% 12 7.0% 15 8.7% 97 11.3%

VERY

IMPORTANT 26 15.1% 34 19.8% 32 18.6% 36 20.9% 25 14.0% 153 17.8%

EXTREMELY

IMPORTANT 95 55.3% 83 48.3% 110 64.0% 115 66.9% 130 75.6% 533 61.9%

TOTAL 172 100% 172 100% 172 100% 172 100% 172 100% 100%

Legal persons ranked the elements by the order of importance (very important and extremely

important) as follows:

grace period (89.6%),

number of guarantors (87.8%),


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service price (82.6%),

term of loan payment (70.4%), and

service quality (68.1%).

Private persons formed a somewhat different order of importance (very important and extremely

important) in dealing with the leasing company:

term of loan payment (94.5%),

service price (interest rate) (74.1%),

service quality (73.4%),

grace period (70.9%), and

number of guarantors (41.2%).

Table 4: Importance of individual elements in dealing with the leasing company for private persons

RESPONSES

TERM OF

PAYMENT

SERVICE

QUALITY

SERVICE

PRICE

(INTEREST

RATE)

NUMBER OF

GUARANTOR

S

GRACE

PERIOD

TOTAL

NO. % NO. % NO. % NO. % NO. % NO. %

UNIMPORTANT 0 0.0% 10 3.6% 11 4.0% 45 16.4% 10 3.6% 76 5.5%

SLIGHTLY

IMPORTANT 0 0.0% 15 5.5% 7 2.6% 32 11.7% 18 6.6% 72 5.3%

IMPORTANT 15 5.5% 48 17.5% 53 19.3% 84 30.7% 52 18.9% 252 18.4%

VERY IMPORTANT 130 47.4% 93 33.9% 75 27.3% 65 23.7% 64 23.4% 427 31.2%

EXTREMELY

IMPORTANT 129 47.1% 108 39.5% 128 46.8% 48 17.5% 130 47.5% 543 39.6%

TOTAL 274 100% 274 100% 274 100% 274 100% 274 100% 100%

5. Present Satisfaction in Dealing with Leasing Companies

The present satisfaction in dealing with leasing companies was also studied separately for legal and

private persons respectively.

The two tables below present the present satisfaction in dealing with leasing companies:

Legal persons‟ present satisfaction in dealing with the leasing company, and

Private persons‟ present satisfaction in dealing with the leasing company.

Each legal and private person was asked to grade their present satisfaction in dealing with the leasing

company through the following five elements:

application processing speed,


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simple forms and procedures,

help with submitting the application,

types of collateral, and

additional services.

For each element, the respondents could grade the degree of their satisfaction at five levels: very

dissatisfied, dissatisfied, satisfied, very satisfied, and extremely satisfied.

Legal persons expressed a high degree of satisfaction in their dealing with leasing companies with the

application processing speed (75.1%) – very satisfied and extremely satisfied. Similarly, satisfaction

was expressed with simple forms and procedures (69.2%). The same can be said of the present

satisfaction related to additional services, help with submitting applications, and types of collateral.

Table 5: Legal persons‟ present satisfaction in dealing with the leasing company.

RESPONSES

APPLICATION

PROCESSING

SPEED

SIMPLE

FORMS AND

PROCEDURES

HELP WITH

SUBMITTING

APPLICATIO

NS

COLLATERAL

TYPE

ADDITIONAL

SERVICES

TOTAL

NO. % NO. % NO. % NO. % NO. % NO. %

VERY

DISSATISFFIED 3

1.7

% 5 2.9% 4 2.3% 2 1.2% 7 4.1% 21 2.5%

DISSATISFIED 5 2.9

% 7 4.1% 4 2.3% 5 2.9% 4 2.3% 25 2.9%

SATISFIED 35 20.3

% 41 23.8% 93 54.0% 101 58.7% 88 51.2% 358 41.6%

VERY SATISFIED 45 26.2

% 56 32.5% 29 16.9% 50 29.1% 55 31.9% 235 27.3%

EXTREMELY

SATISFIED 84

48.9

% 63 36.6% 42 24.5% 14 8.1% 18 10.5% 221 25.7%

TOTAL 172 100

% 172 100% 172 100% 172 100% 172 100% 100%

Private persons‟ responses about the present satisfaction in dealing with leasing companies are very

interesting. They are the most satisfied (very satisfied and extremely satisfied) with collateral types

(85.4%). It should be pointed out that collateral in the leasing service business includes the very asset

(car, piece of machinery or equipment, etc.) that is leased. Besides, private persons are very satisfied

with additional services (78.1%). They are also satisfied with the other elements: simple forms and

procedures (71.6%), application processing speed (65.7%), and help with submitting application

(62.8%).


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Table 6: Private persons‟ present satisfaction in dealing with the leasing company

RESPONSES

APPLICATIO

N

PROCESSING

SPEED

SIMPLE FORMS

AND

PROCEDURES

HELP WITH

SUBMITTING

APPLICATION

S

COLLATERAL

TYPE

ADDITIONAL

SERVICES

TOTAL

NO. % NO. % NO. % NO. % NO. % NO. %

VERY

DISSATISFIED 4 1.5% 8 2.9% 5 1.8% 0 0.0% 5 1.8% 22 1.6%

DISSATISFIED 5 1.8% 8 2.9% 3 1.1% 5 1.8% 12 4.4% 33 2.4%

SATISFIED 85 31.0% 62 22.6% 94 34.3% 35 12.8% 43 15.7% 319 23.3%

VERY SATISFIED 60 21.8% 124 45.3% 83 30.3% 54 19.7% 83 30.3% 404 29.5%

EXTREMELY

SATISFIED 120 43.9% 72 26.3% 89 32.5% 180 65.7% 131 47.8% 592 43.2%

TOTAL 274 100% 274 100% 274 100% 274 100% 274 100% 100%

6. Conclusion

The leasing package development is based on the mutual economic interests of both the lessor and the

lessee. Through the research into leasing services with two basic segments of service users, legal and

private persons, an insight was gained into the importance of individual elements in dealing with

leasing companies.

Based on the private persons‟ responses, the conclusion was reached that the most important element

for these users is the term of payment followed by the service price, i.e. interest rate. Situation is

somewhat different with legal persons. The most important elements for this segment of users include

the grace period and the number of guarantors, followed by the service price.

With respect to users‟ satisfaction with leasing companies‟ services, an interesting insight was gained

in the segment of dealing with private persons. Private persons are the most satisfied with collateral

types required, and in case of leasing it is the object of leasing itself. Legal persons are the most

satisfied with the speed of application processing.

Customer satisfaction is maintained and increased both by the service quality and by various additional

stimulations. It is not enough to carry out the leasing service sale only once. With each customer, new

needs keep arising for acquiring various pieces of machinery and equipment, while they are

traditionally short of investment resources. It is necessary to build and develop proactive marketing,

which is based on occasional contacts with the customer accompanied with the proposal for further use

of leasing package.


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It is necessary to create strong ties with customers, which would be built upon: long-term contracts and

providing more favorable conditions to the customers who sign the long-term contracts, i.e. service the

customer through leasing packages and new equipment acquisition. When assessing the customer

loyalty to the leasing company, one should keep in mind that it is far easier and cheaper to retain the

existing customer than to attract a new one. For these reasons, a leasing company should monitor the

number of lost customers and analyze the reasons for customer dissipation. Proactive marketing should

timely prevent the customer drain and, in the same time, increase customer loyalty to the leasing

company.

7. References

Spector, J., Aron (1961). Basic dimensions of the Corporate image. Journal of Marketing, 25(6), 47.

Agencija za bankarstvo Federacije Bosne i Hercegovine (2013). Informacija o sektoru lizinga

Federacije BiH, Sarajevo.

Backović, E. (1997). Poslovne finansije. Svjetlost, Sarajevo.

Kotler, P. & Keller, K. (2006). Marketing menadžment (12 edition). Prevod „Data status“, Beograd.

Onkvist, Z. & Shaw, J.J. (1989). Service marketing: image and competation. San Jose State University,

Busines Horizons.


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Vol. 1(1) / pp. 55-67


55

Consumers Perceptions about Packaging Appearance of Meggle, Milkos and Zim Milk Products

Ibrahim Obhodaš



[email protected]

Slobodan Vujić

VB Leasing BH


[email protected]

Saša Vujić



[email protected]

Aida Abduzaimović



[email protected]

Citation: Obhodaš, I., Vujić, S., Vujić, S., & Abduzaimović, A. (2014). Consumers Perceptions about Packaging

Appearance of Meggle, Milkos and Zim Milk Products. Journal of Social and Business Studies, 1(1), 55-67.

Article History




Abstract

Purpose of the study is to analyze the design of long-life milk packaging in order to learn how

packaging affects the market share. The marketing aspect analysis will be conducted on the product

packaging design on the example of three dairies doing business in the BH market. It will attempt to

answer the questions as to which packaging elements consumers focus on, which parts of packaging

they consider to be important. In this context, the paper tests the hypothesis that product packaging

significantly affects the market share. The analysis will deal with the functional aspect of packaging,

its operational aspect, durability, reliability, aesthetic appearance, product noticeability and appeal.

Primary data were collected using survey questionnaires filled in by consumers of the actual

products that were the objects of research. Questions were based on the Likert scale from one to

five. The questionnaires were sent to consumers in the region of Central Bosnia, via e-mail. Out of

the 80 survey questionnaires sent, 30 were returned. The response rate is 50 per cent. The survey

questionnaire included six criteria, and the obtained data will be analyzed using statistical methods

(descriptive analysis, correlation, paired sample t-test). Besides the described primary data, the

analysis will use secondary data of international and local organizations involved in market

analysis. The primary research will provide an insight into what influences consumers, and how

packaging affects the market share.

Keywords: Packaging; Consumer Perceptions; Services; Differentiation Strategy; Marketing

JEL Classification: M3



Obhodaš, I., Vujić, S., Vujić, S., & Abduzaimović, A. Journal of Social and Business Studies

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1. Introduction

Packaging leaves the first impression on the customer, and it is for this reason that it deserves the full

attention, particularly in case of a new product. Packaging (Kotler, 2006) includes the design and

production of the container or wrapping for a product or service. Packaging may consist of the primary

product packaging, secondary packaging that is thrown away before the product use, and transport

packaging needed for storing, distinguishing and shipping the product. The analysis from marketing

aspect will be conducted on the design of products by companies Meggle, Milkos and ZIM, which do

business in B&H market. Meggle dairy does business in the B&H and international markets. Milkos

dairy operates only in the local, B&H market and has a high market share in the production of milk and

dairy products. ZIM dairy is a local dairy with a lower market share compared to the other two.

Based on the obtained data and statistical analysis, a parallel will be made, which should show whether

the packaging appearance is directly related to the market share or not. The survey questionnaire that

the consumers will fill in will be processed in the statistical data processing software – SPSS.2 The

questions are based on Likert one-to-five scale. The questionnaires were sent by e-mail to consumers in

the middle Bosnia region. Out of the 80 sent questionnaires, a total of 30 were returned (37,5%).

Methods that will be used in analyzing the issue include descriptive analysis and sample comparison

using the t-test (Student‟s distribution). The descriptive statistics implies calculation of arithmetic

means, central tendency, variability measure, measure for data grouping and strength of relations

between the two variables. The research will use the following patterns:

Arithmetic mean of a data set is a sum of their values divided by the number of observations. If the data

set represents the entire data population, the population mean, , is a parameter given by the

expression:

= =

where N signifies the population size (Newbold et al., 2010).

A median is the value of middle observation, done in the increasing order. If the sample size, n, is an

odd number, the median is exactly the value of middle perception. If the value, n, is an even number,

the median equals the average of two middle perceptions (Wonnacott and Wonnacott, 1990).

2 SPSS is a statistical package for data processing, which allows a fast and simple way of conducting the desired analysis.


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A mode is a value that appears with the highest frequency. Besides these values, the research will use

standard deviation - . Standard deviation is the deviation from the arithmetic mean of the observed

phenomenon.

Coefficient of variation shows how homogenous the tested group is, i.e. how accurate the obtained data

are and whether they can be taken into consideration. For a given random sample of n observations,

with the mean of and standard deviation , selected from the normally distributed population with

the mean , random variable t follows Student‟s t-distribution with n – 1 degrees of freedom if it is

given with the formula (Newbold et al., 2010, p. 290):

t =

2. Analysis of Packaging Design

“Packaging design is the connection of form, structure, materials, color, imagery, typography and

regulatory information with ancillary design elements to make a product suitable for marketing.“

(Klichuk and Krasovec, 2012)

The analysis of product packaging design will be conducted in the way in which product characteristics

are rated with 1 to 5, where 1 means that the product absolutely does not satisfy one of the offered

characteristics, and 5 that it absolutely satisfies one of the offered characteristics.

The analysis will pertain to the following six characteristics (Schoreder, 1999):

1. functional aspect of the packaging

2. operational aspect of the packaging

3. durability and reliability of the packaging

4. aesthetic appearance of the packaging

5. productnoticeability

6. product appeal

These six criteria will reveal consumers‟ views of the packaging of products by the three dairies being

analyzed, and the correlation with their respective market share. In other words, it will show whether

the packaging quality and design is accompanied by the product‟s market share. Questions were sent to

consumers via e-mail. The survey questionnaire comprised six criteria, and the obtained data were


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analyzed using statistical methods (descriptive analysis, correlation, paired sample test – t test). The

survey questionnaire was sent to 80 e-mail addresses, and feedback was obtained from 37,5%.

3. Functional Aspect of the Product

Table 1: Descriptive analysis of consumers‟ views

Functional aspect of

packaging

Arithmetic mean N Std. deviation Std. Error

Mean

Pair 1 Meggle 4.3333 30 .80230 .14648

Zim 3.2000 30 .99655 .18194

Pair 2 Meggle 4.3333 30 .80230 .14648

Milkos 3.7000 30 .91539 .16713

Pair 3 Milkos 3.7000 30 .91539 .16713

Zim 3.2000 30 .99655 .18194

Source: Author’s processing in SPSS 20 statistical software

With respect to the products‟ functional aspect, the conclusion can be reached that products by Meggle

are the most functional, with the average response of 4.333, which means that the respondents

absolutely agree that Meggle product is absolutely functional, with the deviation from arithmetic mean

of 0.803, which is negligible. Respondents somewhat agree that products by MIlkos and Zim are

functional, with the average rating of 3.7 for Milkos and 3.2 for Zim. Deviations are not large, and

therefore these data can be taken as relevant.

In Table 2, we will compare samples, i.e. differences between arithmetic means and standard

deviations. Besides, using the two-tailed t-test we will analyze whether there is a significant difference

between samples.

Table 2: Pairing samples using t-test

Functional aspect

of packaging

Paired Differences t df Sig.

(2-tailed) Mean St.

De-

via-

tion

Std.

Error

Mean

95% Confidence Interval

of the Difference

Lower Upper

Pair 1 Megle

Zim 1.13333 1.25212 .22861 .66578 1.60088 4.958 29 .000

Pair 2 Megle

Milkos .63333 1.18855 .21700 .18952 1.07714 2.919 29 .007

Pair 3 Zim

Milkos .50000 1.35824 .24798 -.00718 1.00718 2.016 29 .053

Source: Author’s processing in the SPSS 20 statistical software


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By comparing two samples of responses that we received from surveyed respondents and that pertain to

the products‟ functional aspect, we obtained the following results:

P = 0,000 Ɇ to the interval of 0,66578 – 1,60088, and it can therefore be concluded that there is a

significant difference between the functionality of Meggle and Zim products.

P = 0,007 Ɇ to the interval of 0,18952 – 1,07714, and it can therefore be concluded that there is a

significant difference between the functionality of Meggle and Milkos products.

P = 0,053 Ƹ to the interval of – 0,0718 – 1,00718, and it can therefore be concluded that there is no

significant difference between the functionality of Zim and Milkos products.

The research revealed that Meggle products are more functional compared to Milkos and Zim products.

4. Products’ Operational Aspect


Operational aspect of packaging Mean N Std. Deviation Std. Error Mean

Pair 1 Megle 3.7667 30 .93526 .17075

Zim 3.2000 30 .99655 .18194

Pair 2 Megle 3.7667 30 .93526 .17075

Milkos 3.5333 30 1.07425 .19613

Pair 3 Zim 3.2000 30 .99655 .18194

Milkos 3.5333 30 1.07425 .19613


The products‟ operational aspect, which implies that the product satisfies simplicity for use, produced

average responses, with the highest rating, that of 3.776 given to the Meggle company. Respondents

somewhat agree that the operational aspect is satisfactory in case of Milkos products, with the average

rating of 3.533 and deviation of 1.07425, which is acceptable. The respondents are not certain whether

the operational aspect of Zim dairy products is satisfactory or not, which is proven by the average

response of 3.2 with the deviation of 0.99655.

The responses analyzed in the previous table lead to the conclusion that products by Meggle milk and

dairy product producer are simpler to use compared to those by the two other producers, Milkos and

Zim.

In Table 4, we will compare samples, i.e. differences between arithmetic means and standard


between samples.


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Operational

aspect of

packaging


(2-

tailed) Mean Std.

Devia

tion

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair 1 Megle

Zim .56667 1.19434 .21805 .12069 1.01264 2.599 29 .015

Pair 2 Megle

Milkos .23333 1.43078 .26122 -.30093 .76759 .893 29 .379

Pair 3 Milkos

ZIM

-

.33333 1.62594 .29685 -.94047 .27380

-

1.123 29 .271


Comparison of the two samples of responses that were obtained from surveyed respondents and that

pertain to the products‟ operational aspect yielded the following results:

P = 0,015 Ɇ (does not belong) to the interval of 0,12069 – 1,01264, and it can therefore be concluded

that there is a significant difference between the operational aspect of Meggle and Zim products.

P = 0,379 Ƹ (belongs) to the interval of - 0,30093 – 0,76759, and it can therefore be concluded that

there is no significant difference between the operational aspect of Meggle and Milkos products.

P = 0,271 Ƹ (belongs) to the interval of – 0,94047 – 0,27380, and it can therefore be concluded that

there is no significant difference between the operational aspect of Zim and Milkos products.

The research (Table 4) showed that Meggle products have a better service value than others, though

this value does not significantly differ from Milkos products, and that it differs significantly from Zim

products.

5. Product Durability and Reliability


Packaging durability and

reliability Mean N Std. Deviation

Std. Error

Mean

Pair 1 Megle 4.4000 30 .62146 .11346

Milkos 3.8000 30 .71438 .13043

Pair 2 Megle 4.4000 30 .62146 .11346

ZIM 3.2667 30 1.08066 .19730

Pair 3 Milkos 3.8000 30 .71438 .13043

ZIM 3.2667 30 1.08066 .19730



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Durability and reliability is related to product quality; consequently, the more reliable a product and the

longer its shelf life, the product is of higher quality. Similar to previous statements, respondents rated

products by Meggle milk and dairy product producer the highest, with the average rating of 4.4, and it

can be concluded that respondents absolutely agree that this producer satisfies durability and reliability.

Somewhat lower rating, though not too low, was given to Milkos milk and dairy product producer – it

amounts to 3.8. Same as in the two previous responses, the lowest rating was given to Zim milk and

dairy product producer, and it amounts to 3.3367. Deviations are not high, and range from 0.62 (for

Meggle), through 0.716 (Milkos) to 1.08 (Zim).

Similar to the previous response, in Table 6 we will compare samples. i.e. differences between their

arithmetic means and standard deviations. Besides, we will use the two-tailed t-test in order to analyze

whether there is a significant difference between the samples.


Packaging

durability and

reliability

Paired Differences t df Sig. (2-

tailed) Mean Std.

Deviatio

n

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair 1 Megle

Milkos .60000 1.06997 .19535 .20047 .99953 3.071 29 .005

Pair 2 Megle

ZIM 1.13333 1.30604 .23845 .64565 1.62102 4.753 29 .000

Pair 3 Milkos

ZIM .53333 1.45586 .26580 -.01030 1.07696 2.006 29 .054


Comparison of the two samples of responses that were obtained from surveyed respondents and that

pertain to the products‟ durability and reliability yielded the following results:


that there is a significant difference between durability and reliability of Meggle and Milkos products.

P = 0,000 Ɇ (does not belong) to the interval of - 0,64565 – 1,62102, and it can therefore be concluded

that there is a significant difference between durability and reliability of Meggle and Zim products.

P = 0,054 Ƹ (belongs) to the interval of – 0,0130 – 1,07696, and it can therefore be concluded that there

is no significant difference between durability and reliability of Zim and Milkos products.


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Table 6 analyzed the differences between samples and proved that Meggle producer achieves better

durability and reliability than the others, while this value does not differ significantly between Milkos

and Zim.

6. Products’ Aesthetic Appearance


Aesthetic appearance of packaging Mean N Std. Deviation Std. Error

Mean

Pair 1 Megle 4.4667 30 .62881 .11480

Milkos 3.6333 30 .92786 .16940

Pair 2 Megle 4.4667 30 .62881 .11480

ZIM 2.0000 30 .94686 .17287

Pair 3 Milkos 3.6333 30 .92786 .16940

ZIM 2.0000 30 .94686 .17287


The surveyed consumers believe that the aesthetic appearance, which leaves the first impression of a

product, among the three offered producers, is by far the best in Meggle milk and dairy product

producer, with the average rating of 4.467 and deviation of 0.6288. The average rating for the aesthetic

appearance of packaging by Milkos producer is 3,63 with deviation of 0.927. Zim milk and dairy

product producer is considered to have poor aesthetic appearance of packaging, with the average rating

of 2 and deviation of 0.94686.

In Table 8, we will compare samples, i.e. differences between their arithmetic means and standard

deviations. Besides, suing the two-tailed t-test we will analyze whether there is a significant difference

between the samples.


Aesthetic

appearance of

packaging


(2-

tailed) Mean Std.

Devia

tion

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair 1 Megle

Milkos .83333 1.17688 .21487 .39388 1.27279 3.878 29 .001

Pair 2 Megle

ZIM 2.46667 1.27937 .23358 1.98894 2.94439 10.560 29 .000

Pair 3 Milkos

ZIM 1.63333 1.49674 .27327 1.07444 2.19223 5.977 29 .000

Source: Source: Author’s processing in the SPSS 20 statistical software


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Comparison of two samples of responses that were obtained from surveyed respondents and that

pertain to the products‟ aesthetic appearance yielded the following results:


that there is a significant difference between aesthetic appearance of Meggle and Milkos products‟

packaging.


that there is a significant difference between aesthetic appearance of Meggle and Zim products‟

packaging.


that there is a significant difference between aesthetic appearance of Zim and Milkos products‟

packaging.

In Table 8 above it was proven that Meggle products have a better aesthetic appearance than those by

the other producers, while Milkos milk and dairy product producer has a better aesthetic appearance of

its product packaging than Zim.

7. Product Noticeability


Packaging noticeability Mean N Std. Deviation Std. Error

Mean

Pair 1 Meggle 4.6333 30 .55605 .10152

Milkos 4.0000 30 .90972 .16609

Pair 2 Megle 4.6333 30 .55605 .10152

ZIM 1.9333 30 .82768 .15111

Pair 3 Milkos 4.0000 30 .90972 .16609

ZIM 1.9333 30 .82768 .15111


With respect to product noticeability, respondents rated that Meggle is the most noticeable, with the

average rating of 4.6333 and deviation from arithmetic mean of 0.55605. Respondents also agree that

Milkos products are noticeable as well, with the respondents‟ average rating of 4 and deviation from

arithmetic mean of 0.90972. Respondents do not agree with the statement that Zim products

arenoticeable on shelves, since the average respondents‟ rating was 1.933 with the deviation of

0.82768.


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In Table 10 we will compare samples, i.e. differences between their arithmetic means and standard


between the samples.


Packaging

noticeability

Paired Differences t df Sig. (2-

tailed) Mean Std.

Deviati

on

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair 1 Megle

Milkos .63333 1.18855 .21700 .18952 1.07714 2.919 29 .007

Pair 2 Megle

ZIM 2.70000 1.02217 .18662 2.31832 3.08168 14.468 29 .000

Pair 3 Milkos

ZIM 2.06667 1.22990 .22455 1.60742 2.52592 9.204 29 .000



pertain to the noticeability yielded the following results:


that there is a significant difference between products‟ noticeability for Meggle and Milkos products‟

customers.


that there is a significant difference between products‟ noticeability for Meggle and Zim products‟

customers.


that there is a significant difference between products‟ noticeability for Zim and Milkos products‟

customers.

Data analysis in Table 10 proves that Meggle products leave a lasting impression at first sight, which

was proven by past studies as well. With respect to Milkos products‟ noticeability, ratings are fairly

high, and it can be concluded that their products are also recognizable in the market. Zim‟s products

were given a very poor rating, and they should put a lot more effort to bring their packaging to the level

of product noticeability.


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8. Product Appeal


Packaging appeal Mean N Std. Deviation Std. Error

Mean

Pair 1 Megle 4.3667 30 .80872 .14765

Milkos 3.8000 30 .92476 .16884

Pair 2 Megle 4.3667 30 .80872 .14765

ZIM 1.8333 30 .83391 .15225

Pair 3 Milkos 3.8000 30 .92476 .16884

ZIM 1.8333 30 .83391 .15225


Respondents absolutely agree with the statement that products by Meggle milk and dairy product

producer appeal to customers (owing to their external appearance –packaging); the respondents‟

average rating was 4.367, and deviation 0.80872. Respondents also agree that Milkos products appeal

to customers, with the respondents‟ average rating of 3.8 and standard deviation of 0.92476.

Respondents do not agree with the statement that products by the Zim milk and dairy product producer

appeal to customers, with the average rating of 1.833 and standard deviation of 0.83391, which is very

low.

In Table 12 we will compare samples, i.e. differences between their arithmetic means and standard

deviations. Besides, we will use the two-tailed t-test in order to analyze whether there is a significant

difference between the samples.


Packaging appeal Paired Differences t df Sig.

(2-

tailed

)

Mean Std.

Deviatio

n

Std.

Error

Mean

95% Confidence

Interval of the

Difference

Lower Upper

Pair 1 Megle

Milkos .56667 1.33089 .24299 .06970 1.06363 2.332 29 .027

Pair 2 Megle

ZIM 2.53333 1.19578 .21832 2.08682 2.97984 11.604 29 .000

Pair 3 Milkos

ZIM 1.96667 1.32570 .24204 1.47164 2.46169 8.125 29 .000



pertain to the products‟ appeal to customers yielded the following results:


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that there is a significant difference between products‟ appeal to Meggle and Milkos products‟

customers.


that there is a significant difference between products‟ appeal to Meggle and Zim products‟ customers.


that there is a significant difference between products‟ appeal to Zim and Milkos products‟ customers.

The research revealed that Meggle products are the most appealing to customers; ratings given to

Milkos milk producer are also very high, while Zim milk and dairy product producer was given very

low ratings and must invest a lot more effort into their packaging to bring it to the average level.

9. Analysis of Meggle, Milkos and Zim’s Market Share in the B&H Market

The research conducted and analysis performed using statistical methods represent consumers‟ views,

i.e. their subjective opinions. For this reason, the following table will present the market share of the

three analyzed dairies and their milk processing over the last five years.

Table 13: Dairies‟ market share in (000) liters

Dairies 2008 2009 2010 2011 2012

Milkos 6.650 9.471 21.560 19.701 16.542

Meggle 29.700 30.351 29.125 31.998 37.389

Zim 3.462 3.322 4.585 5.311 5.829

Source: Milkprocessingd.o.o. Sarajevo

Graph 1: Dairies‟ market share in (000) liters

0

5000

10000

15000

20000

25000

30000

35000

40000

2008 2009 2010 2011 2012

Milkos

Meggle

Zim


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As we can conclude, respondents‟ ratings correspond to the market share, and we can claim with

certainty that one of the problems and poor market share of the Zim producer and, to a degree Milkos

as well, includes the poor appearance of product packaging.

10. Conclusion

Ratings by 30 surveyed respondents lead to the conclusion that packaging by Meggle milk and dairy

product producer is rated the best.Milkos‟ packaging is somewhat similar to Meggle‟s, according to the

surveyed consumers‟ ratings, although it is not yet at the Meggle‟s level. Packaging (external

appearance) of Zim was rated as the poorest of the three offered producers. Not a single element that

affects the product‟s external appearance was rated nearly as well as those by the two other producers

(as shown by t-test). The analysis conducted in SPSS was presented in the tables above (Table 2, 4, 6,

8, 10 and 12). Comparison of two independent samples and their testing yielded the insight that Meggle

packaging has a far better and more functional appearance than that by the two other producers, while

the test with comparing samples showed that Milkos packaging is more functional and better compared

to Zim‟s. Milkos‟ packaging has all the pre-requisites to compete with Meggle in terms of products‟

external appearance, since the ratings given by the surveyed consumers do differ but not to a degree as

in the case of comparison between Meggle and Zim producers.

Survey results correspond to the producers‟ market share. We can deduce that Zim and Milkos

producers must improve their respective packaging in order to increase their market share. Packaging is

not sufficiently noticeable, high-quality, functional in case of Zim and Milkos producers compared to

Meggle producer, which corresponds to their respective market shares.

11. References:

Kotler, P., et al. (2006).Osnove marketinga. Mate, Zagreb

Newbold, P., Carlson, W.L. & Thorne, B. (2010). Statistika za poslovanje i ekonomiju. Mate, Zagreb,

Rosner K. M . & Krasovec, S.A. (2012). Packaging design, Successful Product Branding from Concept

to Shelf. John Wiley & Sons, Inc, Hoboken, New Jersey.

Schoreder, R.G. (1999). Upravljanje proizvodnjom. MATE Zagreb.

Wonnacott T.H. &Wonnacott R.J. (1990). Introductory Statistics for Business and Economics. New

Jork, Wiley.


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68

Perceptions towards IT Security of Online Banking by Students of Montenegro

Nedim Makarević

Embassy of Bosnia and Herzegovina in Pakistan and Afghanistan

[email protected]

Citation: Makarević, N. (2014). Perceptions towards IT Security of Online Banking by Students of Montenegro. Journal of

Social and Business Studies, 1(1), 68-82.

Article History




Abstract

Developing new methods of handling money transactions online did not mean

only new way of managing money for clients, but new ways of online robbery as

well. Possibility of stealing money with no physical contact and any tangible

evidence remaining after that is terrifying for clients. The purpose of this paper

was to analyze perceptions of students of Montenegro who were using online

banking, to provide insight into their view points and to create important set of

information for all subjects active in banking industry. Once survey based on six

variables and specific questions assigned to each one of those variables was

ready, results were collected. Survey was completed at high response rate. Even

202 students from Montenegro completed the survey. Results were analyzed and

presented using descriptive statistics. Limitations of this research are relatively

small sample and quite generic approach to problem. Accordingly, suggestions

for future researches would be based on going more deeply into the issue and

analyzing larger samples. Results indicated that students of Montenegro are quite

relaxed when it comes to issue of online banking, and they perceive banks as

reliable in assuring security of handling money and personal information online.

Since there is gap in literature when it comes to research dealing with IT-security

of online banking in Montenegro, this article is not only unique, but it may be

stimuli for new research with different approaches in the future.

Keywords: Perceptions; IT Security; Online Banking

JEL Classification: D82, G2


Nedim Makarević Journal of Social and Business Studies

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69

1. Introduction

For many clients all around the world, handling money with no physical contact is normal every day

activity. Clients are doing this through their personal computers, smartphones or some other devices

that enable them to access their bank accounts and make transactions using internet. This way of

maintaining money with no physical contact and making money transactions is known as “online

banking”. There are many definitions of online banking provided by different researchers. However, all

of those definitions have some common elements. Those elements are all included in the following

definition, provided by Muniruddeen Lallmahamood (2007) who defined internet banking as banking

services over the public network (the Internet), through which customers can use different kinds of

banking services ranging from the payment of bills to making investments. Internet banking or online

banking has created new ways of handling banking transactions for banking related services and for e-

commerce related transactions such as online shopping (Lallmahamood, 2007).

However, development of handling money with no physical contact did not provide new opportunities

for clients, but new threats as well. In fact, criminals are able to steal money with no physical contact

and without any tangible evidence remaining after their robbery. Knowing this fact turns on red alarm

in heads of many clients. As banks‟ dependence on new technologies increases, their need to protect

their own assets together with assets of their clients increases as well. This is where importance of IT

security for banks' clients starts. Accordingly, as providers of online banking services, it is of crucial

importance for banks to know awareness level and perceptions of their clients towards IT security of

online banking. Since results of this research will enable banks to learn more about their clients, this

work have potential to be important source of information for consideration by banks in terms of their

planning and development activities. If we consider gap in the literature on this issue in Montenegro,

this article becomes even more valuable.

The survey (prepared for this study) was distributed to clients (students in Montenegro) who are

actively using online banking. It was completed at very high response rate. Even 202 respondents

completed survey from Montenegro. Results were analyzed and presented using descriptive statistics.

The main objective of this paper was to analyze students in Montenegro about IT security of online

banking, to provide insight into their view points and to create important set of information for all

subjects active in banking industry. Students are selected as target group not only because of their need

to use banking services, but because of their increased level of reliance on information technologies.

In the following sections of this work, through theoretical background, all necessary definitions along

with brief historical facts important for understanding this topic will be explained. Accordingly,

information on online banking in Montenegro as country in focus will be provided so readers can be


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more familiar with the situation in this state. After explaining used methodology, results will be

analyzed, discussed and concluded.

2. Theoretical Background

Muniruddeen Lallmahamood (2007) defines internet banking as banking services over the public

network (the Internet), through which customers can use different kinds of banking services ranging

from the payment of bills to making investments (Lallmahamood, 2007). On the other hand, Jagdeep

Singh (2012) defines internet banking as online systems which allow customers to plug into a host of

banking services from a personal computer by connecting with the bank‟s computer over the telephone

wires. He is also mentioning some synonyms for internet banking such as online banking, PC banking,

home banking or electronic banking (Singh, 2012).

According to Gordon and Loeb (2002), Information security is concerned with the protection of three

characteristics of information: confidentiality, integrity, and availability through the use of technical

solutions and managerial actions (Gordon & Loeb, 2002).

Banks are not only dealing with intangible money transactions, but also with protection of highly

sensitive information such are credit cards' PINs, personal information about the customers, history of

transactions regarding their bank accounts and all other kinds of information that could enable to third

party conducting the criminal activities and making damage for both, customer and bank. According to

Landwehr (2001), weaknesses of banks' information systems are named vulnerabilities, and it is likely

that such vulnerabilities present opportunities for crime by third parties (Landwehr, 2001).

People perceive that electronic handling of money with no physical contact as one of the alternatives to

keep money in safer forms than cash is. This means that almost all transactions can be realized via

different devices including computers, mail or telephone, without physical contact. However, it is

important to bear in mind that online banking resulted in new types of breaking the law and stealing the

assets. Some of them are still new to the legal systems. Beside the physical security systems of banks,

possibility of crime is still very high. Sometimes, in order to keep public image, banks do not even

investigate and prosecute cybercrimes. If they would do that, customers wouldn't deposit money in

their banks (Pfleeger & Pfleeger, 2006). In short, big question emerge in heads of clients: “Is electronic

way of handling money safe?”


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3. Online Banking in Montenegro

Central bank of Montenegro has been established in 2001, and in the same year it started with reform in

its payment system which started to work in 2005. Even though the law on e-banking has been adopted

in 2003, utilization of e-banking services in Montenegro started in 2005. In year 2009, there was eleven

banks operating in Montenegro and all of them are offering e-banking services. In addition to this, in

2004, service center for electronic operations entitled E-MON has been established. The mission of this

center was to provide ability for using e-services to businesses and population in area of Montenegro.

Data of two leading banks in Montenegro indicated that e-banking services are growing and developing

intensively. Research on acceptance of e-banking services by clients of Montenegro showed results

presented in Graph 1 (Dedeić, 2009).

Graph 1: Bank of Montenegro in which clients are either using, or are willing to use e-banking services

Source: Dedeić, 2009


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According to Shrinath (1997), statement that 'information is power' has nowhere been realized more

significantly than in the banking industry. When discussing the risks and challenges for IT security in

that period of time, Shrinath mentioned four risks: unauthorized system/data access by business users

in the bank; unauthorized system/data access by application/system support personnel; unauthorized

system/data access by customers; unauthorized system/data access by the public at large. Since most

people do not realize that large banks are prone to high risk of security breakdown even without going

so far as the Internet, author decided to examine and explain the most critical areas (Shrinath, 1997).

Lawrence A. Gordon and Martin P. Loeb (2002) wrote an article which presents an economic model

that determines the optimal amount of investment necessary to protect a given set of information. Their

model takes into account the vulnerability of information to a security breach and the potential loss if

such a breach occur. After analysis conducted by Gordon and Loeb (2002), they suggested that in order

to maximize the expected benefit from investment in information protection, a firm should spend only a

small fraction of the expected loss due to a security breach (Gordon & Loeb, 2002).

Researchers' efforts to learn about perceptions of users regarding specific technologies resulted with

birth of technology acceptance model. Pikkarainen, T., Pikkarainen, K., Karjaluoto, H., & Pahnila, S

(2004) conducted a study about consumer acceptance of online banking. They investigated online

banking acceptance in the light of the traditional technology acceptance model (TAM). The data for

their results was consisted of group interview with banking professionals, researching TAM related

literature and studies on e-banking. According to their results, perceived usefulness and information on

online banking in the Web site were the main factors influencing online-banking acceptance

(Pikkarainen et al., 2004).

When it comes to explanation of basic concepts involved with system security, introductory chapter of

book entitled „Security in computing “written by Charles P. Pfleeger & Shari Lawrence Pfleeger

(2006) was very helpful. Their book deals with broad range of computer security related topics such

are: cryptography; secure systems development; basic communications technologies; advices on

planning, risk, and policies; Intellectual property; computer crime, and ethics. In short, it is possible to

conclude that this book can serve as great guide to information about computer security attacks and

countermeasures (Pfleeger & Pfleeger, 2006).

Interesting research was made by Luis V. Casalo, Carlos Flavian and Miguel Guinaliu (2007) who

conducted it with purpose to analyze the influence of perceived web site security and privacy, usability


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and reputation on consumer trust in the context of online banking. Their paper described the positive

effects of security and privacy, usability and reputation on consumer trust in a web site in the online

banking context. This study is very interesting and valuable since it proposes link between security,

privacy and trust in the online banking context (Casaló et al., 2007).

Muniruddeen Lallmahamood (2007) explored the impact of perceived security and privacy on the

intention to use Internet banking. He used an extended version of the technology acceptance model

(TAM) to examine the above perception and concluded that while perceived usefulness is a critical

factor in explaining users‟ intention to use Internet banking, it is important to pay attention to the

security and privacy of users‟ Internet banking. According to results, convenience, ease and time

saving are the main reasons for the adoption of Internet banking, whereas security, trust and privacy

appear to be the top main concerns for non-Internet banking users. As author mentioned, this may also

imply that security concerns and privacy protection are perceived to be part of the overall service

provided by the Internet banking services providers, and he suggests that banks should gain customers‟

confidence through raising security levels of the bank (Lallmahamood, 2007).

Many studies that are dealing with evaluation of clients' trust towards banking include „security“ as

important construct. This leads to conclusion that IT security is important for getting customer‟s trust in

banking business. Yap, K. B., Wong, D. H., Loh, C., & Bak, R. (2010) wrote a paper with aim to

examine the role of situation normality cues (online attributes of the e-banking web site) and structural

assurance cues (size and reputation of the bank, and quality of traditional service at the branch) in a

consumer‟s evaluation of the trustworthiness of e-banking and subsequent adoption behavior. One of

their findings in this work stated that web site features that give customers confidence are significant

for promotion of e-banking (Yap et al., 2010).

Mohanad Halaweh (2012) was writing about user perceptions of e-commerce security. In fact, both

online banking and e-commerce are having common characteristics which are based on fact that there

is no physical (face to face) contact between parties involved in transaction, and same technologies are

being used for doing transaction. This means that both of them are exposed to same risks. Accordingly,

these common characteristics were very useful while identifying relevant variables for this study since

some of them are simply modified and used for this research. Results of study conducted by Mohanad

Halaweh (2012) showed that user characteristics, psychological state and intangible security features

have a significant influence on e-commerce security perception. Additionally, in contrast, tangible

security features and cooperative responsibility have a non-significant influence (Halaweh, 2012).

Singh (2012) commented that customers, both corporate as well as retail ones are no longer willing to

queue in banks, or wait on the phone, for the most basic of services. Therefore, electronic delivery of


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banking services is becoming the ideal way for banks to meet their clients‟ expectations. Accordingly,

author got idea to study the scenario of e-banking, so in his study he considered opinions of 100

customers from Ludhiana. The results of this work revealed that people are aware of e-banking, but not

fully. In fact, the Customers are at ease after using e-banking mainly because it saves the precious time

of the customer. It has also been found that Customer satisfaction varies according to age, gender,

occupation etc. (Singh, 2012).

5. Variables & Survey

For conducting this research, with aim to get closer insight into clients' (students) perceptions towards

online banking in Montenegro, six variables were identified as a result of literature review. Those

variables are as follows:

1.1. Privacy aspect - refers to confidence in the technology and online banking service provider

when it comes to protection against privacy issues such are private information of client,

information about money transactions conducted by client, information about client's personal

passwords etc. Pikkarainen et al (2004) stated that as the amount of products and services

offered via the Internet grows rapidly, consumers are more and more concerned about security

and privacy issues (Pikkarainen et al., 2004).

1.2. Control aspect - When it comes to control perspective of IT security, as it is possible to

conclude from survey questions of Yap, K. B., Wong, D. H., Loh, C., & Bak, R. (2010), this

aspect refers to strictness of identity ascertaining when sending messages to client, or doing

transactions by client, but also to general control by bank when it comes to online transactions'

confidentiality (Yap et al., 2010).

1.3. Psychological aspect - According to Halaweh, Mohanad (2012), the psychological aspect of

security incorporates the feeling of fear, the need to feel that one‟s money is secure, and the

ability to control the payment process and performance of online transactions. Even though he

made research about e-commerce, because of same nature of e-commerce and e-banking which

is remote rather than face-to-face, his work was useful for preparation of survey in this study

(Halaweh, 2012).

1.4. Therefore, it is possible to conclude that many customers have the misconception that the use of

e-banking is vulnerable and that there is a high probability that their money will be lost.

1.5. Tangible features - Halaweh, Mohanad (2012) defines tangible indicators as those technological

security features of websites that can be checked by users, such as https, padlocks and security


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certificates. Tangible features need to be understood and checked by the customer over the

website rather than captured through social communication; this involves having knowledge and

experience of these features, such as knowing what a security certificate means and how to

check whether it has expired (Halaweh, 2012).

1.6. Intangible indicators - When talking about intangible indicators such are famous website and

reputation, Halaweh, Mohanad (2012) says that they are not seen on the website and cannot be

directly checked over the website. They are affected by society in terms of communication and

the environment: where the customer lives and what they hear from others, as well as their past

experience (Halaweh, 2012).

1.7. Perceived IT security Perceived IT security refers to general perception of online e-banking

services by clients when it comes to IT security.

Accordingly, survey consisted of twenty questions was created. Questions were mainly adapted from

previous researches considering Pikkarainen et al (2004), Casaló, Flavián, and Guinalíu (2007), Yap,

K. B., Wong, D. H., Loh, C., & Bak, R. (2010), Halaweh, Mohanad (2012), Muniruddeen

Lallmahamood (2007). All questions prepared for the survey, along with their references they were

adapted from, are presented in Table 1 available in the next page.

Pikkarainen et al. (2004) conducted group interview with banking professionals in order to learn about

consumer acceptance of online banking (Pikkarainen et al., 2004). Specific questions related to privacy

aspect from his interview were adapted and used in this research to examine clients‟ concerns about

their privacy and security issues in e-banking. Casaló, Flavián, and Guinalíu (2007) made research with

purpose to analyze the influence of perceived web site security and privacy, usability and reputation on

consumer trust in the context of online banking (Casaló et al., 2007). Since they are dealing with

similar issue, questions regarding security and privacy were adapted and used in this study. Yap, K. B.,

Wong, D. H., Loh, C., & Bak, R. (2010) used survey to evaluate trustworthiness of e-banking and

subsequent adoption behavior through several factors (Yap et al., 2010). Accordingly, several questions

helpful to measure control aspect of IT security in e-banking were used in our study. Halaweh,

Mohanad (2012) studied user perceptions of e-commerce security (Halaweh, 2012). Since both e-

commerce and e-banking are having the same characteristics such is lack of face to face

communication and physical contact which implies same issues and concerns for final users of such a

services, many questions were adapted from his survey in order to measure psychological aspect,

tangible and intangible indicators, and perceived IT security in general when it comes to online

banking. Also, when it comes to Muniruddeen Lallmahamood (2007), one of questions used in his


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study was useful to adapt for this research when it comes to measuring psychological aspect of IT

security (Lallmahamood, 2007).

Table 3: Review of survey questions

6. Data & Methodology

Data for this study was collected by the means of a survey conducted in Montenegro in 2013. A total of

225 questionnaire forms were delivered to respondents in Montenegro. Surveys were answered with

good response rate, since 202 clients out of 225 completed the survey giving a response rate of 89,7

percent.

Questions Adapted from

I trust in the ability of bank to protect my privacy Pikkarainen et al

(2004) I am not worried about my personal information given to bank

I think that my bank's information system respects personal data protection laws

Casaló, Flavián, and

Guinalíu (2007)

I think that my bank's information system will not provide my personal information to other

companies without my consent

I think that my bank's information system respects user‟s rights when obtaining personal

information

I think that bank needs to ascertains my identity before sending any messages to me Yap, K. B., Wong, D.

H., Loh, C., & Bak, R.

(2010)

I think that bank needs to ascertains my identity before processing any transactions received

from me

I trust that my bank uses security controls for the confidentiality of online transactions

I don't fear when I am using e-banking services

Halaweh, Mohanad

(2012)

I never have misconceptions about using e-banking services

I don't feel anxious to use e-banking services because of its nature, which involves a lack of

face-to-face communication

I feel safe when I release credit card information through Internet banking Lallmahamood,

Muniruddeen (2007)

I don't check the presences of http(s) in the URL when I handle money transactions online

Halaweh, Mohanad

(2012)

I don't check the small padlock icon on the bottom right corner of the website when I handle

transactions online

I don't check the digital security certificate of the web site when I handle money transactions

online

I would use e-banking services only provided by on a reputable bank Halaweh, Mohanad

(2012) I would use e-banking services only provided by local bank

I think my bank shows great concern for the security of any online transactions Casaló, Flavián, and

Guinalíu (2007)

I believe using e-banking services online is secure Halaweh, Mohanad

(2012) Using e-banking services gives me a feeling of security


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Surveys were filled at universities by students (randomly selected) in Montenegro. This resulted in a

sample that was well distributed in terms of demographic information (e.g. age, and education). The

main reason why students were selected as target for this study is fact that probability of their

involvement in e-banking services is high. As students, usually they are coming from different areas

and they live far away from home. For those reasons, students depend on their parents who are most

frequently using banks to send them money. Considering students studying in 2013/2014 as generation

well familiar with possibilities provided by newly developed technologies that enable using internet

almost everywhere, it was decided to select them as focus of this research. Since it was not difficult to

collect 202 surveys completed by students who are in the same time clients using e-banking services,

this decision seems to be successful.

Data is mainly numerical except demographics part which is categorical. Seven point Likert scale was

used in order to test the agreements of the respondents on six variables through twenty questions. The

collected data is then inserted into an excel spreadsheet and analyzed descriptively. The surveys were

distributed both online and personally. Online version of survey was created, and its link was sent via

e-mail to potential participants.

7. Results

1.1. Demographics

Demographics information includes respondents' department, positions within the department and their

education levels, gender and age. When it comes to gender of Montenegro‟s respondents, there were 106

females and 96 males who replied to the survey. This leads to conclusion that there were more females than

males who participated in this research.

When it comes to educational background of respondents, students of all three cycles of study

(Undergraduate, Master and PhD) have been surveyed. Students of undergraduate degree covered 64,9% of

Montenegro‟s respondents. On the other hand, 28,2% of respondents in Montenegro were Master degree

students. When it comes to PhD students, 6,9% of respondents are of this group. This is in total very low

percentage of PhD students involved in the research. Statistics regarding this is presented in Graph 2.


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Graph 2: Study cycle of students (respondents)

When it comes to departments studied by respondents involved in this study, situation is as presented in

Table 4.

Table 4 – Departments of respondents

Department

Montenegro

Number of students %

Management 62 30,7

Architecture 29 14,4

Education 12 5,9

IT 29 14,4

Economics 17 8,4

Electrical

Engineering 24 11,9

Mathematics 6 3,0

Biology 23 11,4

Total 202 100

When it comes to ages of respondents, according to Graph 3, it is possible to conclude that most of

them were younger than thirty years, some were between 31 and 40 years of age, while only few were

older than 41.


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Graph 3: Age of respondents

1.2. Survey results

From Table 5, it is possible to conclude that students of Montenegro believe that their bank‟s

information system respects personal data protection laws, and that their privacy is assured.

Table 5 – Privacy aspect

Variable: Privacy aspect Mean

Questions Montenegro (5,7)

I trust in the ability of bank to protect my privacy 5,5

I am not worried about my personal information given to bank 6,1

I think that my bank's information system respects personal data protection

laws 5,9

I think that my bank's information system will not provide my personal

information to other companies without my consent 5,3

I think that my bank's information system respects user‟s rights when

obtaining personal information 5,5

Table 6 explains that students of Montenegro are again quite relaxed when it comes to control of their

information, and in the same time they showed trust that banks are using security controls for

confidentiality of online transactions.


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Table 6 - Control aspect

Variable: Control aspect Mean


I think that bank needs to ascertains my identity before sending any

messages to me 5,4

I think that bank needs to ascertains my identity before processing any

transactions received from me 5,2

I trust that my bank uses security controls for the confidentiality of

online transactions 5,2

When it comes to psychological aspect of respondents, students of Montenegro agreed with the

statements that they don‟t fear when using e-banking services, they don‟t have misconceptions about

using e-banking services, they don't feel anxious to use them, and they feel safe when releasing credit

card information through internet banking (Table 7).

Table 7 - Psychological aspect

Variable: Psychological aspect Mean


I don't fear when I am using e-banking services 5,4

I never have misconceptions about using e-banking services 5,6

I don't feel anxious to use e-banking services because of its nature,

which involves a lack of face-to-face communication 5,8

I feel safe when I release credit card information through Internet

banking 5,5

There are specific tangible features of online banking that enable clients who are using these services to

evaluate confidentiality of transaction, and to gain specific level of control over them in that way.

Results from Montenegro indicated that their students do not pay too much attention to mentioned

security tangible features such are URL, padlock icon and security certificate of the web site (Table 8).

Table 8 - Tangible features

Variable: Tangible features Mean


I don't check the presences of http(s) in the URL when I handle money

transactions online 5,5

I don't check the small padlock icon on the bottom right corner of the

website when I handle money transactions online 5,7

I don't check the digital security certificate of the web site when I handle

money transactions online 5,6


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There are intangible assets such is bank‟s reputation that sometimes affect clients without their

awareness. However, it is important to underline that students of Montenegro moderately agreed

(overall mark 5,5) with asked statements. Detailed results regarding this aspect are presented in table 9.

Table 9: Intangible features

Variable: Intangible features Mean


I would use e-banking services only provided by on a reputable bank 5,3

I would use e-banking services only provided by local bank 5,6

I think my bank shows great concern for the security of any online

transactions 5,5

When it comes to students‟ statement about their faith in security of online banking services, once

more, results indicated that Montenegro‟s students believe to this security. When it comes to another

statement that examined their feeling of security, respondents provided same answer and slightly

agreed with the statement (Table 10).

Table 10: Perceived IT security

Variable: Perceived IT security Mean


I believe using e-banking services online is secure 5,8

Using e-banking services gives me a feeling of security 5,2

8. Conclusion

This research provided important insights about clients‟ (students‟) perceptions towards IT security of

online banking in Montenegro. Response rate of 89,7% was good in target sample. Students are

selected as a target group for this study for many reasons. Facts that they are mostly studying away

from home, that they are receiving scholarships and that they are generation that was growing up with

internet are enough to justify focus of this research. Limitations of this research are relatively small

sample and quite generic approach to problem. Accordingly, suggestions for future researches would

be based on going more deeply into the issue and analyzing larger samples. This article represents very

unique set of information for the banks already operating in Montenegro, or having tendency to start

business in this country. This research empirically proved that students of Montenegro are quite relaxed

and perceive banks as reliable in assuring security of handling money and personal information online.


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9. References

Casaló, L. V., Flavián, C., & Guinalíu, M. (2007). The role of security, privacy, usability and

reputation in the development of online banking. Online Information Review, 31(5), 583–603.

Dedeić, G. (2009). Elektronsko bankarstvo sa klijentima i za njihov račun; osvrt na bankarski sektor u

Crnoj Gori. Montenegro: University of Montenegro.

Gordon, L., & Loeb, M. (2002). The Economics of Information Security Investment. ACM

Transactions on Information and System Security, 5(4), 438–457.

Halaweh, M. (2012). Modeling user perceptions of e-commerce security using partial least square.

Journal of Information Technology Management, 23(1).

Lallmahamood, M. (2007). An Examination of Individual‟s Perceived Security and Privacy of the

Internet in Malaysia and the Influence of This on Their Intention to Use E-Commerce: Using An

Extension of the Technology Acceptance Model. Journal of Internet Banking and Commerce,

12(3).

Landwehr, C. (2001). Computer security. International Journal of Information Security, 1(1).

Pfleeger, C. P., & Pfleeger, S. L. (2006). Security in Computing (4th ed.). Prentice Hall.

Pikkarainen, T., Pikkarainen, K., Karjaluoto, H., & Pahnila, S. (2004). Consumer acceptance of

online banking: an extension of the technology acceptance model. Internet Research, 14(3),

224–235.

Shrinath, B. (1997). Information Security in Banks. Journal of Financial Crime, 5(1), 65–71.

Singh, J. (2012). Scenario of e-banking in today's life - a survey. International Journal of Computing &

Business Research.

Yap, K. B., Wong, D. H., Loh, C., & Bak, R. (2010). Offline and online banking – where to draw the

line when building trust in e-banking? International Journal of Bank Marketing, 28(1), 27–46.


83

JOURNAL OF SOCIAL AND BUSINESS STUDIES

(Volume 1 / Issue 1 / Sept 2014)

CONTENT

Refereed Articles

1 Short-Run Determinants of the HRK/USD Exchange Rate and Policy Implications

Yu Hsing

11 The Impact of Global Financial Crisis in the Albanian Banking System

Alba Cani

29 Is the Republic of Macedonia “good lover”? Republic of Macedonia-NATO-EU case

study

Biljana Chavkoska

42 Creating Value Added for Leasing Service Customers: Case Study of VB Leasing


Slobodan Vujić, Saša Vujić, Aida Abduzaimović, Ibrahim Obhodaš

55 Consumers Perceptions about Packaging Appearance of Meggle, Milkos and Zim Milk

Products

Ibrahim Obhodaš, Slobodan Vujić, Saša Vujić, Aida Abduzaimović

68 Perceptions towards IT Security of Online Banking by Students of Montenegro

Nedim Makarević

CHARACTERISTICS OF THE MONTENEGRIN CAPITAL MARKET IN TERMS OF EFFICIENCY

Tamara Backović Vulić1

Faculty of Economics, University of Montenegro Abstract Capital market took the central role in the Economic Reform Agenda for Montenegro. Mass voucher privatization (MVP) has been the initial promoter of capital market development in Montenegro and it has had a substantial impact on the nature of the transition process. Having in mind that Montenegro is a small and developing country, it is no doubt that the establishment of the capital market institutions has been a foundation for the capital market development. The main objective of this paper was to undertake an econometric analysis of the stock exchange index MONEX20 time series aiming to measure whether the Montenegrin capital market is efficient. Capital market efficiency was tested by performing a stationarity test, Run test and autocorrelation function test. Final result from all tests showed that the capital market in Montenegro is not an efficient one. Investors can use technical analysis to predict future movement of prices and beat the market.

KEYWORDS: CAPITAL MARKET; STOCK EXCHANGE INDEX; RISK; STATIONARITY; CAPITAL MARKET EFFICIENCY JEL Classification: C22, C52, G10 1. INTRODUCTION An efficient market is a market where market prices fully reflect all of the relevant information. The efficient-market hypothesis (EMH) is the method for evaluating the movement of stock prices. According to the EMH, stocks are always traded at their fair value on the stock market, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. Therefore, it should be impossible to outperform the overall market through expert stock selection or market timing, and the only way an investor can possibly obtain higher returns is by purchasing riskier investments. Business cycle theorists belive that business cycles can be predicted by using the multiple regression model. Statistician Maurice Kendall tested the movement of stock prices and prediction posibilities with a computer model in 1953. His conclusion was that the stock prices are formed randomly. This ultimately led to the creation of the Random Walk Hypothesis, and the closely related efficient-market hypothesis which states that random price movements indicate a well-functioning or efficient market.2 The efficient-market hypothesis was developed by the American economist Eugene Fama in 1965. The EMH involves three different forms of efficiency: the weak form, the semi-strong form and the strong form. In the weak form of efficiency current prices are fully defined by historical information. The semi-strong form goes a step further by 1 Address: Jovana Tomasevica 38 Podgorica, Montenegro e-mail: [email protected] 2 Kendal, Maurice G., “The Analysis of Economic Time-Series-Part I: Prices”, 1953., Journal of the Royal Statistical Society, str. 11-34.

incorporating all historical and currently public information into the price. The strong form includes historical and current public information as well as private information such as insider information in the stock prices.3 Montenegro is a small developing country in Eastern Europe. Countries which belong to this group usually have undeveloped financial institutions, undeveloped financial instruments and an inefficient capital market due to nontransparent trading and high transaction costs. Recently, the interest of investors for emerging capital markets has been steadily rising. Therefore, an investigation of market efficiency for emerging markets in this region was very popular in the last decade. Tabak and Cajueiro4 presented empirical evidence of short and long-run predictability in stock returns for nine European transition countries. They concluded that stock returns can be predicted in the long-run except for the Ukrainian stock exchange, which converges towards efficiency. Random walk hypothesis is proven for Bulgarian and Ukrainian stock exchanges. Jovic5 investigated the efficiency of the capital market in Republika Srpska (a constituent of Bosnia and Herzegovina). His conclusion was not unique, but according to sign tests and autocorrelation tests a weak-form of efficiency was present. Ivanov, Lomev and Bogdanova6 investigated capital market efficiency for seven East-European emerging economies: Bulgaria, Serbia, Croatia, Ukraine, Russia, Turkey and Romania. For all of the analyzed capital markets there is a clearly an indication for deviation from Random walk hypothesis and thus the studied markets manifest inefficiency. Prorok and Radović7 tested the weak form of efficiency of the capital market in Serbia. Results from their research show that the capital market in Serbia is not efficient. 2. CAPITAL MARKET IN MONTENEGRO

Montenegro Stock Exchange was established in June 1993, based on the Law on Money and Capital Market. In July 1995, Montenegro Stock Exchange harmonized its business activities in compliance with the Law on stock exchange, stock exchange activities and agents. Montenegro Stock Exchange obtained founding license from the Federal Ministry of Finance, license for trading with short term securities from Yugoslav Central Bank and license for trading with long term securities from the Federal Securities Commission. Since September 2006 the Montenegro Stock Exchange has been an entirely privately owned company due to the fact that the Government of Montenegro sold its 5% stake in Montenegro Stock Exchange through an auction sale on the stock market. For this package, the price was € 1,100.00 per share, or five times more than the nominal value, representing a market capitalization of the Stock Exchange of € 1.4 million. Even though the first stock exchange in Montenegro was founded in 1993, the first trade with long term securities was realized only after the Parliament passed the Law on Securities in 2002. The Law on Securities regulates the terms and conditions for issuance,

3 Fama, Eugene F., “Efficient Capital Markets: A Review of Theory and Empirical Work”, 1970., Journal of Finance Vol. 25, pp. 383-417. 4 Tabak, Benjamin and Cajueiro, Daniel, “). Testing for predictability in equity returns for European transition markets”, 2006., Economic Systems Vol. 30, pp. 56-78. 5 Jović, Dragan, “Weak-form efficiency of the stock market”, 2010. Bankarstvo Vol.5-6, pp. 56-79. 6 Ivanov, Ivan, Lomev, Boyan and Bogdanova, Boryana, “Investigation of the market efficiency of emerging stock markets in the East-European region”, 2012., International Journal of Applied Operational Research Vol. 2 (2), pp. 13-22 7 Prorok, Vesna and Radović, Dajana, “Weak-form hypothesis testing of the Serbian capital market efficiency”, 2014., Socioeconomica Vol. 3 (5), pp. 51-64

public offering and trading of securities, the rights and obligations of participants in the securities market, and the organization, scope and powers of the Securities Commission. The New Montenegrin Stock Exchange (NEX Montenegro) Podgorica was founded in September, 2001. In November 2001, it was given the authorization to do business by the Montenegrin Securities Commission. Until the end of 2010, Montenegro has had two stock exchanges: Montenegro Stock Exchange and NEX Montenegro Stock Exchange. In January 2010, stockholders in NEX Montenegro approved a merger with the Montenegro Stock Exchange. The merger consolidated and simplified securities trading in Montenegro. After the merger, NEX Montenegro was established with principal stock exchange indices are MONEX20 and MONEXPIF. The starting value of MONEX20 index on January 1st 2011 was 14,522.53 stock market points, and the starting value of MONEXPIF index was 6,595.82 stock market points. The Securities Commission is the market regulator in Montenegro. The SCM was founded in 2000 and it took over the jurisdiction from the Yugoslav Federal Commission for Securities and Financial Markets. The SCM has the authority to enact implementing provisions to the Law on Securities, to approve and supervise public offers of securities, to license and supervise securities markets participants, to authorize and regulate collective investment schemes, to regulate the manner and scope of the trading in the securities market and to regulate takeovers. According to the Securities Law, trading of securities can be performed only at the official stock exchanges; therefore no OTC market exists in Montenegro. The bond market in Montenegro is limited to issuing T-bonds and T-bills by the Central Bank of Montenegro, and municipal bonds by the different municipalities in Montenegro. Because of these limitations, this aspect of the market is rather undeveloped. Hence, it can be concluded that the capital market in Montenegro is actually the stock market. 3. THE METHODOLOGY The procedure for testing weak form of efficiency assumes identification of a pattern for short-term market returns movements by using historical data. Weak form of efficiency is accomplished if the pattern of movements cannot be identified and it can be inferred that the returns follow a random walk process. There are several techniques available for determination of patterns in time series data. Three very popular tests of market efficiency are applied in this paper – Augmented Dickey-Fuller (ADF) test, Run test and Autocorrelation Function (ACF) test.

The Augmented Dickey–Fuller (ADF) test is the most popular stationary test. The ADF test is used to test the unit root hypothesis. If a time series has a unit root then it is non-stationary and it follows random walk. The test is based on two possible equations:

ttt uYY 1 (1)

After subtraction of Yt-1 from the left and the right side of equation, the equation can be written in the following form:

ttttttttt uYYtuYYtuYYYY 11111 )1( (2)

The null hypothesis can be defined in two ways: H0: =0 or H0: =1. But the basic assumption of ADF test is that the error term ut is a white noise. For hypothesis testing, tau distribution is applied. The reason for using tau statistics instead of Student t statistics is the fact that if the series is not stationary then the normal distribution cannot be applied. Null hypothesis is rejected if the estimated value of tau statistics is smaller than critical value. In this case, the analyzed series doesn’t have a unit root and is stationary. If the time series is stationary, that means that it follows a predictable path. If the stationary time series represents returns on the capital market, then this market is not efficient.

The Run test is a non-parameter test for checking if the Random walk hypothesis applies for specific time series. This test assess whether a sequence of observations can be accepted as a random sequence. If the test is applied on the time series which represents stock returns, then the sequence can be defined as positive or negative. If the future changes in stock prices are random, than the Null hypothesis of series random movements cannot be rejected. In this case, normal distribution can be applied, with the expected value and standard deviation defined bellow:

N

nNNRE ii

231)1(

)( (3)

2

1

2

3331

231

31

)1(

)(2)]1([

NN

NnNNNn iiiiiR (4)

Where in represents the total number of positive and negative sequences. If the sample is

large, than normal distribution can be assumed. In this case the empirical value of normal

distribution for the Run test is:

R

RERZ

)(

(5)

If the empirical absolute value of Z statistics is greater than the critical value, then the Null

hypothesis is rejected, the Random walk hypothesis does not apply and the capital market

is inefficient.

The Hurst exponent is a method for quantification of long-memory, which is based on

estimating a range of swings of the variable over time. Edwin Hurst was a hydraulic

engineer working on the Nile River in the 20th century. He wanted to test the hypothesis

that the different annual river flows were random. In order to prove this statement, he

developed a way of testing a series of numbers to determine whether or not they were

random. He was surprised when the test showed a negative answer.

The same test can be applied to any time series, including financial time series. According

to the original proposition, the Hurst exponent (H) can vary between 0 and 1. If the value

of the Hurst exponent is 0.5, then the time series follows a random walk. If the value of the

exponent is less than 0.5, the series becomes anti-persistent. It means that if the value of

the series in the previous period was high, it is likely to reduce in the future towards mean

value. If the Hurst exponent is greater than 0.5, then the time series does not follow a

random walk.

According to Peters8, one of the most popular methods for estimating the Hurst exponent is

the Range to standard deviation ratio. The first step in estimating the Hurst exponent is to

define a time series with M observations. Financial series tend to display non-stationarity.

Therefore, original financial time series must be reduced to returns series as follows:

)log(1

t

tt M

MX (6)

The reduced time series has to be divided into several sub-periods with equal number of

observations. For each sub-period we calculate a mean return (μa):

n

kka X

n 1

1 (7)

Then the returns has to be trend-adjusted by subtracting the mean return form daily returns:

aatat Xr ,, (8)

In the next step, cumulative trend adjusted return series for each sub-period is created:

t

iiatat rc

1),,(, (9)

Range of the cumulative trend adjusted return series of each sub-period is measured by

taking differences of maximum and minimum cumulative returns:

),...,,min(),...,,max( ,,2,1,,2,1, ataaataaat ccccccR (10)

The standard deviation of each sub-period is:

t

iaatat X

tS

1

2,, )(

1 (11)

Rescaled range to standard deviation of each sub-period is calculated with the following

ratio:

8 Peters, Edgar E. “Chaos and order in the capital markets”, 1996. John Wiley & Sons, Inc. pp. 62-72

at

atat S

R

S

R

,

,,)( (12)

Finally, the Hurst exponent can be obtained by solving the equation:

Ht nC

S

R.)( (13)

The Autocorrelation function is one of the stationarity tests. Autocorrelation function with lag k is defined as follows:

0 k

k (14)

Where k represents covariance of analyzed series and 0 its variance. If the

autocorrelation function is based on a data from sample, then sample covariance and

variance can be calculated using following estimates:

n

YYYY kttk

))(( (15)

n

YYt

2

0

)( (16)

Where n represents sample size and Y sample expected value.

Autocorrelation function calculated from the sample is:

0

k

k (17)

Graphical representation of k

is called sample correlogram.

Non-randomness in data can be detected using an autocorrelation function and a partial

autocorrelation function.

If a time series represents returns on specific stock, then the autocorrelation function is

calculated by using the following formula:

2

1

1

)(

))((

n

tt

kt

kn

tt

k

RR

RRRR

p (18)

Where k is the number of lags and Rt the stock return rate defined as:

uP

PR

t

tt

100ln1

(19)

Two most important tests which use the autocorrelation function are the standard error test

and the Box-Pierce Q test. The first one calculates the autocorrelation function for every

lag in the sample and identifies which one is statistically significant. On the other hand,

Box-Pierce statistics calculates the autocorrelation function for all the series values up to

lag k.

The value of standard error is calculated as follows:

N

k

tt

1

1

221 (20)

Where N represents a number of observations and k is the autocorrelation function for lag

k. If the autocorrelation function value is statistically significant, then the null hypothesis

can be rejected and the conclusion is that the autocorrelation at given lag exists. If an

analyzed time series is a return on a specific stock, this means that this series is not

stationary and that the market is efficient.

The Box-Pierce Q statistics estimate is:

k

t

t

tN

RNN

1

2

)2( (21)

The calculated value of Q-statistics is compared to the critical value of χ2 distribution.

Usually, small values of the autocorrelation function lead to small values of Q-statistics. In

this case, the null hypothesis of no autocorrelation cannot be rejected and the time series is

stationary. If the time series represents stock return then the market is inefficient.

4. EMPIRICAL RESULTS

The research in this paper is based on the stock market index MONEX20, obtained from the Montenegro stock exchange. It is daily data (5-day weeks) and the sample is defined for the period from January 5th 2004 until September 1st 2014. The sample consists of 2781 observations. The time series analyzed in this paper represents the return on stock market index MONEX20, which is calculated using the following formula:

100)20

20ln(20

1

t

t

MONEX

MONEXtRTMONEX (22)

Where RTMONEX20 represents the return on stock market index MONEX20

4.1 Unit root stationarity test

The first step in providing an appropriate unit root test is estimating the AR(1) model for

return on stock market index MONEX20:

ttt uRTMONEXRTMONEX 12020 (23)

If the serial correlation and heteroscedasticity in errors are present, Phillips-Perron test is more suitable, but if the model has no autocorrelation error problem and heteroscedasticity, then the Augmented Dickey-Fuller test can be applied. The estimated AR(1) model was free from residual autocorrelation, but heteroscedasticity was detected. Therefore, the Phillips-Perron test will be implemented.

Table 1. Phillips-Perron unit root test for series RTMONEX20

Null Hypothesis: RTMONEX20 has a unit root Exogenous: None Bandwidth: 20 (Newey-West automatic) using Bartlett kernel

Adj. t-Stat Prob.*

Phillips-Perron test statistic -45.21587 0.0001 Test critical values: 1% level -2.565794

5% level -1.940938 10% level -1.616623

*MacKinnon (1996) one-sided p-values.

Residual variance (no correction) 0.000262 HAC corrected variance (Bartlett kernel) 0.000393

Phillips-Perron Test Equation Dependent Variable: D(RTMONEX20) Method: Least Squares Sample (adjusted): 1/05/2004 9/01/2014 Included observations: 2781 after adjustments

Variable Coefficient Std. Error t-Statistic Prob.

RTMONEX20(-1) -0.787994 0.018535 -42.51394 0.0000

R-squared 0.393997 Mean dependent var 1.74E-07 Adjusted R-squared 0.393997 S.D. dependent var 0.020807 S.E. of regression 0.016198 Akaike info criterion -5.407546 Sum squared resid 0.729368 Schwarz criterion -5.405414 Log likelihood 7520.193 Hannan-Quinn criter. -5.406776 Durbin-Watson stat 2.000628

Source: Author’s processing in the Eviews 7 statistical software

The absolute value of the Phillips-Perron statistics is much higher than the critical values of test statistics at 1%, 5% and 10% significance level. Hence, we reject the Null hypothesis. Time series RTMONEX20 is stationary and it does not have a unit rot. Accordingly we reject the hypothesis of weak form efficiency for the capital market in Montenegro.

4.2 The Run test

In order to test whether the previous results about the Montenegrin capital market efficiency are correct, a nonparametric Run test will be implemented. Null hypothesis defined by Run test suggests that Random walk theory is applicable for analyzed time series.

Table 2. Run test applied to return on index MONEX20Error! Not a valid link. Source: Author’s processing

Run test applied separately for every single year of the analyzed period did not clear up whether capital market in Montenegro is efficient or not. According to the results, the capital market of Montenegro is weak-form efficient in 7 out of the 11 analyzed years. The capital market of Montenegro is efficient in the first two and the last five years of analysis. In the next step, Run test was provided for the whole period from 2004 to 2014. The final conclusion of this test is that the Random walk of return on stock market index MONEX20 is not recognized. Overall, capital market of Montenegro in this period is not efficient. The good side of this test is the fact that in the last five years the capital market of Montenegro is showing signs of efficiency.

4.3 The Hurst exponent

The Hurst coefficient was calculated based on the subsamples of stock market index return RTMONEX20. A RTMONEX20 time series was divided into 6 series with following length: 100, 500, 1000, 1500, 2000 and 2500.

The mean (m) for a partial time series was calculated and used for creating a mean-adjusted time series, MONEX20t-m. After calculating the cumulative derivate series Zt, the next step was computing the range of Zt and standard deviation of mean-adjusted time series, MONEX20t-m. The results are given in the following table:

Table 3. Calculation of Hurst coefficient elements

n m Rn Sn log(Rn/Sn) log(n) 100 0.002312 0.266986 0.018039 1.170268 2 500 0.004285 0.688874 0.01898 1.559848 2.69897 1000 0.003376 1.059308 0.018253 1.763677 3 1500 0.001763 2.67179 0.020674 2.111384 3.176091 2000 0.0011 2.807956 0.018608 2.178683 3.30103 2500 0.000807 3.012126 0.017293 2.240999 3.39794

Source: Author’s processing

The value of the Hurst coefficient is the slope value in regression where log(Rn/Sn) represents the dependent variable and the log(n) is the independent variable. According to the results given in Table 3, the Hurst coefficient value for the Montenegrin capital market

is 0.79. The probability of positive return values being followed by positive values and negative return values being followed by negative values is 79%. That means that the return on stock market index MONEX20 does not follow random walk and that the capital market of Montenegro is persistent.

4.4 The Autocorrelation function

The autocorrelation function (ACF) test is examined to identify the degree of autocorrelation in a time series. It measures the correlation between the current and lagged observations of the time series of stock returns.

If a time series has unit root then the autocorrelation function slowly decreases starting from the value of one, and the partial correlation function has only the first value which differs from zero. If one time series has two unit roots, ACF acts the same way as for the one unit root series, but the PACF has only the first two non-zero values.

Table 4. ACF and PACF values for time series return on index MONEX20

t AC PAC 1 0.210 0.210 2 0.044 -0.000 3 0.009 -0.000 4 0.068 0.069 5 0.086 0.060 6 0.034 0.001 7 0.021 0.012 8 0.052 0.044 9 0.088 0.063

10 0.056 0.018 11 0.022 0.003 12 0.045 0.036 13 0.020 -0.010

t AC PAC14 0.067 0.05215 0.061 0.03216 0.059 0.03317 0.008 -0.02318 -0.013 -0.02619 0.027 0.02120 0.051 0.02921 0.032 0.00322 0.010 -0.00223 0.030 0.02124 0.043 0.01525 0.025 -0.00226 -0.005 -0.017

t AC PAC27 0.007 0.00928 0.025 0.00829 -0.004 -0.02830 0.011 0.00831 0.034 0.02932 0.024 0.00333 0.054 0.04434 0.029 0.00835 0.027 0.01036 0.014 -0.00437 -0.016 -0.03038 0.012 0.01539 0.060 0.049

t AC PAC40 0.038 0.00441 0.024 0.01242 0.008 -0.00443 0.000 -0.01644 0.028 0.01745 0.037 0.02146 -0.033 -0.05147 -0.015 -0.01348 0.012 0.00449 0.005 -0.01350 -0.017 -0.02351 -0.022 -0.01252 -0.035 -0.031

Source: Author’s processing The number of lags was defined by the criterion that t is equal to T , where T is the total number of observations in time series RTMONEX20. According to the Null hypothesis an analyzed time series is not stationary, meaning that the AC and PAC values are equal to zero. To determine whether the autocorrelation coefficient is different from zero, the value of the autocorrelation coefficient at each lag will be compared with a band at 95%

confidence interval: ±1.96·1/ T . If the value of the autocorrelation coefficient at a given lag falls outside this band, then it is significant which implies rejecting the null hypothesis that the value of the coefficient is zero. In this paper, the number of observations is

T=2783. Therefore, the lower band of confidence interval is: -1.96·1/ 2783 = -0.037 and

the upper band has a value of 0.037=1.96·1/ 2783 . Almost half of the AC and PAC coefficients are not statistically significant. In order to test the joint hypothesis that all autocorrelation coefficients are simultaneously equal to zero, the next step will be calculating the Ljung-Box Q-statistics. The value of Q-statistics is:

197.16720.0708472783ˆ1

2

t

kkTQ

The critical value of chi-square statistics with 1% significance level is:

616.78ˆ 01.0;52

Ljung-Box Q statistics indicate evidence of dependence in the first and higher moments of the return distributions. The Ljung-Box Q statistics for the first 52 lags rejected the null hypothesis at 1% significant level for the entire sample series. To sum up, ACFs show strong evidence of serial correlation and it is also supported with Ljung-Box Q statistical findings. Therefore, the null hypothesis of no serial correlation for the return on stock market index MONEX20 is rejected.

5. CONCLUSION The main task of this paper was to investigate the presence of the weak-form of efficiency on the capital market in Montenegro. In order to do so, basic parametric and non-parametric tests were obtained. According to the Unit root test, the capital market of Montenegro does not have the characteristics of randomness for the return time series, which means that participants can beat the market and gain an abnormal profit. The Run test also showed that the capital market is inefficient. The optimistic side of the Run test is the fact that the random walk hypothesis was accepted for the last five years of analysis. It means that the capital market in Montenegro is slowly developing, growing and achieving the transparency needed to become efficient. The Hurst exponent value did not corroborate this finding that the Montenegrin capital market has developing lately. The conclusion of this test was that the capital market in Montenegro is persistent. The last test was investigating the autocorrelation for the return of the stock market index MONEX20. According to the results of AC and PAC values and Ljung-Box Q statistics, the capital market in Montenegro is inefficient. Even though all tests that were obtained in this paper showed that weak-form of efficiency is not present, some of the results indicate a positive trend for the capital market in Montenegro i.e. that it is becoming more efficient. The suggestion for the policy makers and all the relevant institutions would be to enforce a strict implementation of the laws and bylaws, as well as to decrease transaction costs. This would ensure that a participant has much more to lose by trying to beat the market than by playing a “fair game”.

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Biografija sa Bibliografijom

KARADŽIĆ DR VESNA, vanredni profesor Diplomirala na Ekonomskom fakultetu u Podgorici, sa prosječnom ocjenom 10, kao najbolji student generacije; magistrirala na University of Columbia (New York, USA), a doktorirala na Ekonomskom fakultetu u Podgorici. Imala studijski boravak na London School of Economics. Na Ekonomskom fakultetu radi od 1983. godine, od 2007. godine je u zvanju vanrednog profesora. Kao gostujući profesor predaje na specijalističkim studijama na Fakultetu političkih nauka i doktorskim studijama na Medicinskom fakultetu Univerziteta Crne Gore. Prodekan je za međunarodnu saradnju, rukovodilac magistarskih studija Ekonomija, predsjednik Komisije za postdiplomske studije „Preduzetnička ekonomija“, šef usmjerenja Kvantitativna ekonomija, član Senata Univerziteta Crne Gore, član Upravnog odbora ASECU (Association of SE Europe Economic Universities). Vanredni je član Naučnog društva ekonomista. Na Ekonomskom fakultetu predaje predmete Ekonometrija i Statistika. U nastavi i istraživanju bavi se i drugim disciplinama: ekonometrijska analiza tražnje, istraživanje marketinga, istraživačke metode u biznisu. Učestvovala je na više domaćih i međunarodnih konferencija. Član je redakcije časopisa: Montenegrin Journal of Economics. U izdanju Univerziteta Crne Gore 2001. godine objavila je monografiju „Ekonometrijska analiza tražnje“, a najvažniji radovi iz oblasti ekonometrije i statistike su: 1. „Financial time series analysis based on Montenegrin stock exchange market indices“,

European Economics and Financial Society 2009 Conference on „Current Challenges in the Global Economy: Prospects and Policy Reforms“, Warsaw, 2009, ttp://www.eefs.eu/conf/Warsaw/Papers/580a.pdf

2. „Quality of governance measured by World Bank indicators for the region of south-east Europe“ (koautor), South-East Europe Review, Vol. 11, No. 4, Brussels, 2008.

3. „Applied analysis of financial time series based on the Montenegrin capital market indices“, International Conference on Applied Economics (ICOAE), Thesalloniki, 2008.

4. „The Quality of Governance Impact to the FDI Inflow – Balkan Case“ (koautor) Zbornik International Conference Contemporary Challenges of Theory and Practice in Economics, Ekonomski fakultet, Beograd, 2007.

5. “Modeli kompleksne analize tražnje”, Montenegrin Journal of Economics, Vol. 2, No. 3, 2006.

6. “Competitivness shadowed by powerty”, Fulbrighters in science Conference, Berlin, 2006. 7. “Osnovni koncepti ekonometrije vremenskih serija”, Preduzetnička ekonomija, Vol. 10,

Podgorica, 2005. 8. “Ekonomski portret crnogorskih domaćinstava”, Matica, 2/2000, Podgorica, 9. ”Ocjena Engelove funkcije izdataka za ishranu domaćinstava u Crnoj Gori”, Zbornik

radova Sym-Op-IS 99, Beograd 10. ”Mjerenje efekata poreske reforme na korisnost”, Zbornik radova Sym-Op-IS 98,

Beograd 11. ”Modeliranje potrošacke tražnje na osnovu teorije životnog ciklusa”, Zbornik radova,

Ekonomski fakultet, Podgorica, 1995. 12. ”Uloga metoda linearnog programiranja u procesu donošenja poslovnih odluka”, Zbornik

radova, Ekonomski fakultet, Podgorica, 1995. 13. ”Analiza elastičnosti tražnje duvana u Crnoj Gori”, Zbornik radova Sym-Op-IS 95, Donji

Milanovac, 1995. 14. ”Statistical Indicators of the Economic Role of Women in Developing Countries”, UNESCO

Conference proceedings, Dubrovnik, 1986.

Prof. Dr Maja Baćović Mjesto i datum rođenja: 23.05.1976, Podgorica, Crna Gora

Adresa: Jovana Tomaševića 37, Podgorica, Crna Gora

Telefon/Fax: +382 78 11 33 22; +382 69 067 619

e-mail: [email protected] , [email protected] Obrazovanje

• Doktorske studije, Ekonomski fakultet, Univerzitet Crne Gore (2002-2005)

• Postdiplomske studije “Preduzetnička ekonomija”, Ekonomski fakultet, Univerzitet Crne Gore (1998-2001)

• Ekonomski fakultet, Univerzitet Crne Gore (1994-1998)

• Gimnazija “Slobodan Škerović", Podgorica (1990-94)

Radno iskustvo:

• Univerzitet Crne Gore, Ekonomski fakultet, Podgorica o Član Vijeca drustvenih nauka Senata Univerziteta Crne Gore (oktobar 2014-) o Član Senata Univerziteta Crne Gore (2013-2014) o Prodekan za međunarodno saradnju i nauku (oktobar 2013-) o Prodekan za međunarodnu saradnju, nauku i nastavu (decembar 2012-septembar 2013) o vanredni profesor na predmetima: Ekonomska statistika i Makroekonomija za

preduzetnike (2011-) o docent na predmetima: Ekonomska statistika, Makroekonomija za preduzetnike,

Monetarna statistika, Demografska analiza (2006-2011) o Asistent, 2002-2006. o Saradnik, 2000-2002.

Profesionalni angažmani:

• Član Odbora direktora “Jadransko brodogradilište Bijela”, a.d, Bijela

• Predsjednik Savjeta statističkog sistema Crne Gore (2006-2011), član Savjeta od 2011-2013

• Predsjednik Odbora direktora Montenegroberze a.d (2006-2008)

• Institut za strateške studije i prognoze (istraživač i analitičar) (1999-2007)

• USAID funded Economic reform project in Montenegro (2001-2005)



Specijalizacije, konferencije, treninzi i radne posjete

1. Horasis, Global China Business meeting, Lake Como, Italy, October 2014. 2. Crnogorska akademija nauka i umjetnosti (CANU), Centar mladih naučnika: “Glavni

trendovi u istraživanju mladih naučnika u savremenoj nauci: promjena paradigme od atoma ka bitima”, II interdisciplinarna medjunarodna konferencija, Podgorica, septembar 2014.

3. Horasis, Global Russia Business Meeting, Valensia, Spain (April 2014) 4. Horasis, Global China Business meeting, Hague, Netherlands, November 2013. 5. Montenegrin Academy of Arts and Sciences, Centre of Young Scientists: Regional

Conference on Status of Young Scientists and Science in the region, Podgorica, October 17-18, 2013.

6. Eduniversal World convention, Bangalore, India (9-12. oktobar 2013) 7. DIEM 2013, Dubrovnik, Hrvatska (Septembar 2013) 8. PRME samit, CEEMAN, Bled, Slovenija (Septembar 2013) 9. OEAD: Conference on Higher education cooperation in Central, Eastern and South Eastern

Europe, Vienna, July 3-5, 2013. 10. Development in Economic Theory and Policy, Bilbao, Spanija, 27-28.jun 2013. 11. Vienna Institute for International Economics (WIIW) and Joint Vienna Institute (JVI): Public

Governance and Structural Reforms, Vienna, Austria (April 2013) 12. Global China Business Meeting, Horasis, Riga, Latvia, November 25-27, 2012

13. “Ukraine and Montenegro: Present and Perspectives”, conference organized by National Academy of Science of Ukraine, National Academy of Pedagogical Sciences of Ukraine and Montenegrin Academy of Sciences and Arts, Kiev, 16-19 October 2012.

14. Učešće na sastanku Svjetskog ekonomskog foruma: „World Economic Forum's Annual Meeting of the New Champions, Dalian, People's Republic of China, 13-16 September 2011”, nakon selekcije organizatora (50 mladih naučnika iz svijeta) a na bazi nominacije Crnogorske akademije nauka I umjetnosti (2011)

15. Third International Conference on overcoming regional disparities, Cetinje, Montenegro (organized by: Montenegro Ministry of Economy, UNDP and GIZ), June 2012

16. European Commission, Joint Research Centre, Institute for Prospective Technological Studies: Workshop on the development of ERAWATCH: ERA and neighborhood countries, Seville, Spain (November 2009)

17. Vienna Institute for International Economics (WIIW) and Joint Vienna Institute (JVI): Public Private Partnership, Vienna, Austria (September 2009)

18. 4th Balkan Summer School on Survey Methodology, Durres, Albania, August 31-September 4, 2009, organized by Instat, Albania and Statistics Sweden, Balkan Project Office

19. World Conference on RESEARCH INTEGRITY: Gulbenkian Foundation, Lisbon, Portugal, 16 - 19 September 2007

20. II International symposium on Economic Theory, Policy and Applications, Athens, Greece, August 2007

21. UNESCO workshop on Science, Technology and Innovation Indicators: Trends and Challenges, Skopje, March 2007

22. "Europe and Latin America", CLADEA 2006 (September 10-13), Montpellier, France

23. Bruno Leoni Institute: Second Misses Seminar, Sestri Levante, Italy (2005)

24. Vienna Institute for International Economics (WIIW) and Joint Vienna Institute (JVI): Foreign Investment Policies, Vienna, Austria (October 2005)

25. EEA/ Eastern Economic Association Annual Meeting, Washington, DC, USA (2004)

26. ASSA/ American Economic Association Annual Meeting, San Diego, CA, USA (2004)

27. International Law Institute: Post-privatization: Managing the Challenge, Washington, D.C (jun 2004)

28. JFDP fellow: University of Delaware (USA), Department for Economics, academic year 2003/04

29. World bank: ”Reforms in SEE countries”, Budapest, Hungary (2003)

30. “Economic Perspectives of Former Yugoslavia states”, Cavtat, Croatia (2003)

31. “Investment opportunities in Serbia and Montenegro”, Brussels and Luxemburg (2003)

32. British Trust fellow: University of Greenwich (UK), Department for Economics, summer of academic year 2000/01

33. Ronald Coase Institute Fellow, ISNIE - «New Institutional Economics», University of Tuebingen, Tuebingen, Germany (september 2000)

34. “Financial Management”, Training for faculty members, USAID, Mostar, Bosnia&Herzegovina (july-august 2002)

35. International Management Teachers Academy, CEEMAN, Bled, Slovenia (May 2002)

36. “Corporate Governance”, OECD, Zagreb, Croatia (2002)

37. “Economic Assesment of FRY”, OECD, Paris, France (2002)

38. OECD: International accounting standards, Zagreb, Croatia (2002)

39. OECD: International accounting standards, Istanbul, Turkey (2001)

40. OECD: International accounting standards, Sarajevo, Bosnia and Herzegovina (2001)

41. USAID-«Capital Market Regulation», Dubrovnik, Croatia (2000)

42. USAID-“Reform of the pension system”, Ljubljana, Slovenia (1999)

43. Training for trainers, BLS, Washington, DC, USA (September 1999)

44. “Economic indicators”, BLS, Washington, DC, USA (August-September 1999)

45. IAS fellow, Comparative economic and political systems, Prague, Czech Republic (july 1999)

46. USAID-"Reform of the pension system", Budapest (1998)

47. G-17 fellow, Summer school of economic policy, Belgrade (June 1998)

Objavljene knjige:

1. Maja Baćović: "Demografske promjene i ekonomski razvoj-analiza investicija u humani kapital", ISSP, Podgorica (2006) (ISBN: 86-84299-05-1)

2. Maja Baćović: "Sistem nacionalnih racuna", ISSP, Podgorica (2003) (ISBN: 86-84299-09-4)

Objavljeni radovi (na engleskom jeziku)

1. Maja Bacovic: "Fiscal policy under ageing society", proceedings of the 4th international conference: "Entrepreneurship and Innovation as Precondition for Economic Development", University of Montenegro, Faculty of Economics, ISBN: 978-86-80133-71-3

2. Maja Bacovic: "Demand driven growth in small open, import dependable economy", 1st Dubrovnik International Meeting-DIEM 2013, University of Dubrovnik, Department of Economics and Business Economics, Croatia, ISBN: 978-953-7153-30-04 (abstracts), ISBN: 978-953-7153-31-3 (full papers, CD-ROM)

1. Maja Bacovic: “Population trends and Economic Development of Montenegro in XXI Century”, Entrepreneurial Economy, Vol XVIII, September 2012, ISSN, 1451-6659, pages: 23-38

2. Maja Bacovic: “Efficiency driven Economic Growth: Investment in Human Capital and Technological Readiness”, Proceedings of the 7th international conference of Association of Economic Universities of South and Eastern Europe and the Black Sea Region-ASECU, Rostov on Don (Russia), 2011, pages 486-497, ISBN: 978-5-7972-1741-1

3. Maja Bacovic, Milena Lipovina-Bozovic: “Knowledge Accumulation and Economic Growth”, Faculty of Economics, University of Montenegro and ASECU, ISBN: 978-86-80133-54-6, 2010, strane: 37-50

4. M. Bacovic, V. Vujovic: "Property rights and private autonomy in Montenegro", Applied Economic Research, Published by: Athens Institute for Education and Research, ISBN: 978-960-6672-31-6, 2008, pages: 279-288

5. Maja Bacovic: “Demographic Changes in transition countries: Opportunity or Obstacle for Economic Growth: case of Montenegro”, European Research Studies, Vol X, issue 3-4, 2007, ISSN: 1108-2976, pages 31-44

6. Veselin Vukotic, Maja Bacovic: "Economic Freedom and Economic Growth in South East Europe" , Transition Studies Review, Publisher: Springer Wien, ISSN: 1614-4007 (Paper) 1614-4015 (Online), Issue: Volume 13, Number 1, May 2006, Pages: 81-91

7. Maja Baćović: „Small Open Economies and the Global financial crisis“, „Entrepreneurial Economy“, Vol. XVI/I, Podgorica (2010) (ISSN: 1451-6659), pages: 93-105

8. Maja Baćović: «The Economic Crisis and Investment in Knowledge», „Entrepreneurial Economy“, Vol. XVI/II, Podgorica (2010) (ISSN: 1451-6659), pages: 112-125

9. Maja Bacovic: "Montenegro's Human Development Profile", Montenegro Economic Trends (MONET), Vol 21, Podgorica (2005), (ISSN: 1451-3617)

10. Maja Bacovic: "Institutional framework for new statistical system in Montenegro – Proposed Law on Statistics and Statistical System in Montenegro", Montenegro Economic Trends (MONET), Vol 20, Podgorica (2005), (ISSN: 1451-3617)

11. Veselin Vukotic, Maja Bacovic, Zoran Djikanovic: "Pension Reforms in Europe and Latin America", CLADEA 2006 (September 10-13), Montpellier, France (rad prezentiran na konferenciji, neobjavljen još uvijek)

Objavljeni radovi (na našem jeziku)

12. Maja Baćović: «Preduzetništvo i nezaposlenost u Crnoj Gori», konferencija «Zapošljavanje kroz prizmu preduzetništva», Ekonomski fakultet, Podgorica, 2012. ISBN: 978-86-80133-63-8, pages: 229-238

13. Maja Baćović: «Stanovništvo i ekonomski razvoj Crne Gore u XXI vijeku», u zborniku: Stanovništvo i razvoj», IDN, Beograd, 2012. ISBN: 978-86-7093-140-4, strane: 29-39

14. Maja Baćović: »Determinante rasta produktivnosti i dohotka sa osvrtom na mala i srednja preduzeća», konferencija «Ekonomski razvoj kroz prizmu preduzetništva», Ekonomski fakultet, Podgorica, 2011. ISBN: 978-86-80133-56-0, strane: 177-187

15. Maja Baćović: «Ekonomski rast na Balkanu: uslovljen rastom efikasnosti i/ili članstvom u EU?», u zborniku: «Balkan i EU», Institut društvenih nauka-IDN, Beograd, 2011, ISBN: 978-86-7093-137-4, strane: 112-122

16. Maja Baćović:„Demografski problemi i njihove imlikacije – kvalitet ljudskog činioca u razvoju”, u monografiji „Crna Gora u XXI vijeku – u eri kompetitivnosti, Ekonomski razvoj”, Crnogorska akademija nauka i umjetnosti – CANU, posebna izdanja (monografije i studije), knjiga 73, sveska 3, Podgorica, 2010, ISBN: 978-86-7215-242-5, strane: 185-199

17. Maja Baćović:„Tržište rada u Crnoj Gori”, u monografiji „Crna Gora u XXI vijeku – u eri kompetitivnosti, Ekonomski razvoj”, Crnogorska akademija nauka i umjetnosti – CANU, posebna izdanja (monografije i studije), knjiga 73, sveska 3, Podgorica, 2010, ISBN: 978-86-7215-242-5, strane: 331-357

18. Maja Baćović: «Ekonomska kriza i investicije u znanje», u zborniku: «Kriza i razvoj», Institut društvenih nauka-IDN, Beograd, 2010, ISBN: 978-86-7093-133-6, strane: 241-251

19. Maja Baćović: „Investicije u znanje i ekonomske slobode“, u zborniku «Ekonomske slobode i razvoj Crne Gore», CANU, Podgorica, 2009, ISBN: 978-86-7215-223-4, ştrane: 85-96

20. Maja Baćović: »Mala otvorena ekonomija i globalna finansijska kriza«, u zborniku: «Kriza i globalizacija», Institut društvenih nauka-IDN, Beograd, 2009, ISBN: 978-86-7093-133-9, pages: 136-145

21. Maja Baćović: »Socioloske odrednice nastanka i razvoja kapitalizma«, u zborniku "Ekonomija i sociologija", Institut društvenih nauka-IDN, Beograd, 2007, ISBN: 978-86-7093-117-6, ştrane: 181-188

22. Maja Baćović: Tržište kapitala-ogledalo tržišne ekonomije“, Miločerski ekonomski forum, SECG i SES, Miločer, 2008, SBN: 978-86-907245-3-6, strane: 409-416

23. Maja Baćović: „Teorija racionalnih očekivanja: da li se može empirijski potvrditi u ekonomiji Crne Gore“, „Preduzetnička ekonomija“, Vol. XV/I, Podgorica (2006) (ISSN: 1451-6659)

24. Maja Baćović: «Konkurencija-preduslov efikasnog funkcionisanja trzista», «Preduzetnička ekonomija», Vol. 11, Podgorica (2006) (ISSN: 1451-6659)

25. Maja Baćović: «Demografske promjene, investicije u humani kapital i ekonomski razvoj», Miločerski ekonomski forum, SECG i SES, Miločer, Budva, 2006, ISBN: 869072451-6

26. Maja Baćović: »Profitabilni biznis i pametna država – kako to izgleda u praksi?«, u zborniku "Biznis i drzava", Institut društvenih nauka-IDN, Beograd, 2006, ISBN: 86-7093-110-9

27. Maja Baćović: «Cultural Phenomenon of the Liberalism», «Preduzetnička ekonomija», Vol. 10, Podgorica (2005) (ISSN: 1451-6659)

28. Maja Baćović: «Konkurentnost poslovanja u Crnoj Gori - preduslov povecanja bogatstva naroda», Miločerski ekonomski forum, SECG i SES, Miločer, Budva, 2005, ISBN: 86-907245-0-8

29. Maja Baćović: »Investitori u istrazivanje i razvoj (novo znanje): pojedinci i(ili) drzava«, u zborniku "Pojedinac i drzava", Institut društvenih nauka-IDN, Beograd, 2005, ISBN: 86-7093-108-0

30. Maja Baćović: «Demografske promjene u Crnoj Gori», «Preduzetnička ekonomija», Vol. 7, Podgorica (2004) (ISSN: 1451-6659)

31. Maja Baćović: «Znanje i ekonomski rast: uticaj povecanja nivoa znanja na ekonomski rast», «Preduzetnička ekonomija», Vol. 4, Podgorica (2004) (ISSN: 1451-6659)

32. Maja Baćović: «Politika konkurencije u malim tržišnim privredama: kako podspiješiti konkurenciju u Crnoj Gori», Miločerski ekonomski forum, SECG i SES, Miločer, Budva, 2004, ISBN: 86-84651-02-2

33. Maja Baćović: »Sociološke determinante ekonomskog progresa: kultura i društveni kapital«, u zborniku "Kultura i razvoj", IDN, Beograd, 2004, ISBN: 86-7093-106-0

34. Maja Baćović: «Humani kapital i ekonomski razvoj: kvantifikacija humanog kapitala i uticaj investicija u humani kapital na ekonomsku efikasnost», «Preduzetnička ekonomija», Vol. 2, Podgorica (2003) (ISSN: 1451-6659)

35. Maja Baćović: «Konvertibilnost novca – preduslov ostvarivanja ekonomskih sloboda pojedinaca i ekonomskog rasta i razvoja», «Preduzetnička ekonomija», Vol. 1, Podgorica (2002)

36. Maja Baćović: »Slobodna međunarodna razmjena i ekonomske slobode«, u zborniku "Politika i slobode", IDN, Beograd, 2003, ISBN: 86-7093-103-6

37. Maja Baćović: «MVP-uticaj na ekonomski razvoj», Miločerski ekonomski forum, SECG i SES, Budva, 2002

38. Maja Baćović: «Reforma statističkog sistema u Crnoj Gori – preduslov za uključivanje u svetske ekonomske tokove», Ekonomist (SEJ), Vol 34, Beograd (2001), (ISSN: 0354-5253)

39. Maja Baćović: «Ekonomsko obrazovanje u računovodstvu, reviziji i finansijama», SRRCG, Računovodstvo i finansije, br.10 (oktobar 2001)

40. Maja Baćović: «Obračun agregata proizvodnje i dohotka u SNA sistemu nacionalnih računa», Računovodstvo i finansije, br.8 (avgust 2001)

41. Maja Baćović: «Uticaj medjunarodnog kretanja kapitala na ostvarivanje eksterne ravnoteže u privredi», savjetovanje SECG i SES, Miločer (septembar 2001)

42. Maja Baćović: «Turbo kapitalizam – globalni proces i njegove implikacije u zemljama u tranziciji», u zborniku "Globalizacija i tranzicija", IDN, Beograd (jun 2001), ISBN: 86-7093-097-8

43. Maja Baćović: «Globalizacija i stepen siromastva u svijetu», Globalizacija (zbornik radova), Ekonomski fakultet, Podgorica (novembar 2000)

44. Maja Baćović: »Opšta obilježja ESA 1995. i nove statističke institucije u Crnoj Gori«, PMB 2000, Ekonomski fakultet, Podgorica, 2000

45. Maja Baćović: «Direktno vs. Indirektno finansiranje institucija visokog obrazovanja», Ekonomski fakultet, Podgorica (septembar 2000)

46. Maja Baćović: “Vidovi i efekti postojanja korupcije”, u zborniku "Sistem i korupcija", IDN, Beograd, 2000, ISBN: 86-7093-093-5

47. Maja Baćović, Zoran Djikanovic: “Proces privatizacije u Crnoj Gori”, NDEJ, Beograd (Zbornik radova) (mart 2000)

48. Maja Baćović: “Institucionalni okvir za rad privatizacionih fondova u Crnoj Gori”, SEJ, Miločer, Budva (zbornik radova) (septembar 1999)

Projekti

1. Ministarstvo za ljudska i manjinska prava Crne Gore i UN Woman, projekat: Jačanje ekonomskih i socijalnih prava žena u Crnoj Gori, izrada publikacije: “Žene i muškarci u Crnoj Gori – 2012”, konsultant

2. UNDP: Human Development Report for Montenegro, 2011. (član Savjetodavnog odbora i autor dijela teksta)

3. CANU: Crna Gora u XXI vijeku – u eri konkurentnosti, podprojekat: Ekonomski razvoj 2009-2010

a. Rad na temu: Demografski problemi i njihove implikacije – kvalitet ljudskog činioca u razvoju

b. Rad na temu: Tržište rada u Crnoj Gori

4. Agenda ekonomskih reformi za Crnu Goru - 2007-2011

5. Prostorni plan RCG do 2020 godine (2007)

6. Agenda ekonomskih reformi za Crnu Goru-izvještaj i preporuke (2005)

7. Human Development Report for Montenegro, ISSP and UNDP (2005), Koordinator izrade Izvještaja i autor dijela teksta

8. Transition report for Montenegro, ISSP (2004)

9. Reforma statističkog sistema Crne Gore (2003)

10. Agenda ekonomskih reformi - 2002-2006 (2002)

11. Program obuke za brokere, dilere i investicione menadžere, Komisija za HOV Crne Gore, predavač (2007)

12. Škola statistike, predavač (2006-2010)

Članstvo:

1. Centar mladih naučnika, Crnogorska akademija nauka i umjetnosti

2. Odbor za ekonomska istraživanja, Crnogorska akademija nauka i umjetnosti

3. Član Predsjedništva Društva ekonomista i menadžera Crne Gore (prethodni Savez ekonomista Crne Gore)

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Aleksandra Nojković Osnovni biografski podaci Aleksandra Nojković rođena je u Beogradu 1973. godine. Diplomirala je na Ekonomskom fakultetu Univerziteta u Beogradu, na smeru Ekonomska statistika i informatika 1998. godine. Iste godine upisala je poslediplomske studije na Ekonomskom fakultetu u Beogradu na smeru Ekonometrija. Magistrirala je 2004. godine, a doktorirala 2007. godine sa temom Modeli specifične zavisne promenljive u makroekonometrijskoj analizi privreda u tranziciji. Na stručnom usavršavanju Aleksandra Nojković boravila je na Univerzitetu Njujork (New York University), kao stipendista Američkog programa za razvoj mlađih univerzitetskih kadrova (Junior Faculty Development Program) u periodu: januar-jun 2006. godine i na Londonskoj školi ekonomskih i političkih nauka (London School of Economics and Political Science), kao stipendista Ministarstva za prosvetu i nauku Republike Srbije u periodu: oktobar 2011-februar 2012. godine. Pohađala je letnju školu Kointegracione analize na Univerzitetu u Kopenhagenu (University of Copenhagen) 2005. godine. Aktivnost u nastavi Aleksandra Nojković je zaposlena na Ekonomskom fakultetu Univerziteta u Beogradu od oktobra 1999. godine. Bila je asistent-pripravnik, a potom i asistent na grupi predmeta iz oblasti Ekonometrija. Za docenta na istoj grupi predmeta izabrana je u julu 2008. godine. Na osnovnim studijama izvodi nastavu iz sledećih predmeta: Ekonometrija, Analiza vremenskih serija (smer: Statistika, informatika i kvantitativne finansije) i Osnovi ekonometrije (smerovi: Ekonomska analiza i politika i Međunarodna ekonomija i spoljna trgovina - opcija Međunarodne finansije). Na diplomskim studijama angažovana je na predmetima: Ekonometrijski modeli uporednih podataka i panela (smer: Kvantitativna analiza – Ekonometrija) i Ekonometrijski metodi i modeli (smerovi: Ekonomska analiza i politika i Makroekonomija privreda u tranziciji). Na doktorskim studijama matičnog fakulteta izvodi nastavu na predmetu Ekonometrija 1D. Tokom 2011.i 2014. godine bila je angažovana na doktorskim studijama Ekonomskog fakulteta Univerziteta Crne Gore u Podgorici. Bila je predavač na kursu za sticanje zvanja portfolio menadžer pri Komisiji za hartije od vrednosti Republike Srbije. Naučno-istraživački rad Aleksandra Nojković je autor i koautor većeg broja naučnih radova. Dva koautorska rada publikovana su u časopisima sa SSCI liste. Nekoliko (ko)autorskih radova Aleksandre Nojković saopšteni su na konferencijama međunarodnog i domaćeg značaja i potom publikovani u odgovarajućim zbornicima. Aleksandra Nojković je koautor udžbenika Primenjena analiza vremenskih serija i pomoćnog učila Zbirka rešenih zadataka iz ekonometrije. U značajnom obimu učestvovala je u pisanju

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monografija: Strukturni fiskalni deficit i dinamika javnog duga Srbije i Položaj ranjivih grupa na tržištu rada Srbije. Od 2001. godine neprekidno je angažovana na projektima Ministarstva za nauku i tehnološki razvoj Republike Srbije. Takođe je bila istraživač na nekoliko projekata koji su rađeni za potrebe međunarodnih organizacija (UNDP i EC). Dobitnica je nagrade Narodne banke Srbije u 2011. godini za koautorski rad “Inflation Triggers in Transition Economies: Their Evolution and Specific Features“ (sa P. Petrović i Z. Mladenović), koja se dodeljuje autorima čiji su radovi iz oblasti makroekonomije ili finansija objavljeni u renomiranim međunarodnim časopisima. Ostale aktivnosti Na Ekonomskom fakultetu Univerziteta u Beogradu Aleksandra Nojković bila je član Komisije za doktorate, član Saveta fakulteta i sekretar Katedre za statistiku i matematiku. Član je Naučnog društva ekonomista Srbije. Aleksandra Nojković je član redakcije časopisa Panoeconomicus, vodećeg međunarodnog časopisa koji se izdaje u našoj zemlji. Član je mentorske komisije za dva kandidata doktorskih studija na Ekonomskom fakultetu u Beogradu i član mentorske komisije jednog kandidata na doktorskim studijama Ekonomskog fakulteta Univerziteta Crne Gore u Podgorici. Bila je mentor pri izradi dva master rada, kao i član mentorske komisije za četiri kandidata master studija.

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R. br. Prezime Ime Opis reference Na SCI listi

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Primenjena analiza vremenskih serija, udžbenik za studente osnovnih i master studija zadisciplinu Analiza vremenskih serija, Ekonomski fakultet, CID, Beograd, 2012 (koautor saZ. Mladenović). NE


Zbirka rešenih zadataka iz ekonometrije, pomoćno učilo za studente osnovnih i masterstudija za disciplinu Ekonometrija, Ekonomski fakultet, CID, Beograd, 2011 (koautor sa Z.Mladenović). NE

3 Nojković AleksandraStrukturni fiskalni deficit i dinamika javnog duga Srbije (redaktor M. Arsić), Ekonomskifakultet, CID, Beograd, 2012 (koautor). NE

4 Nojković AleksandraPoložaj ranjivih grupa na tržištu rada Srbije (redaktor G. Krstić), UNDP Srbija, 2010(koautor). NE


<eng>Inflation Persistence in Central and Southeastern Europe: Evidence fromUnivariate and Structural Time Series Approaches, Panoeconomicus, Volume 59(2),2012, pp. 235-266 </eng> (koautor sa Z. Mladenović). DA


<eng>Inflation Triggers in Transition Economies: Their Evolution and Specific Features,Emerging Markets Finance and Trade , Volume 47(5), 2011, pp. 101-124 </eng>(koautor sa P.Petrović i Z.Mladenović). DA

7 Nojković Aleksandra<eng>Transition and Growth: Some Unexpected Outcomes, Economic Annals, VolumeLIV, No. 183, 2009, pp. 7-31 </eng>(koautor sa B. Cerović). NE


<eng>The New Keynesian Phillips Curve in Emerging Europe: Some MethodologicalIssues and Empirical Results, 1043-1054, Proceedings of the international scientificconference From Global Crisis to Economic Growth: Which Way to Take? (editor A.Praščević), Faculty of Economics, Belgrade</eng>, 2012 (koautor sa Z. Mladenović). NE


<eng>Discrete Choice Modeling within Nonstationary Panels: Some Empirical Results onEuropean Transition Economies, 22-25, XXXVIII Simpozijum o operacionimistraživanjima (<eng>SYM-OP-IS 2011; editords</eng>: J. Vuleta, M. Backović i Z.Popović), Zlatibor, 2011 (koautor sa Z. Mladenović). NE

10 Nojković Aleksandra<eng> Growth and Industrial Policy During Transition: Economic Annals, Volume LIX, No.201, 2014, pp. 7-34 </eng>(koautor sa B. Cerović i M. Uvalić). NE