In recent years in Serbia fiscal irresponsibility is in the spotlight question
(unsustainable) fiscal imbalances. The fiscal program of the Government of the Republic of
Serbia, especially since 2006 as a combination of tax cuts and increases in public spending,
has led to a large, primarily structural deficit in the budget. The global economic crisis hit
Serbia in the fourth quarter in 2008. The immediate impact of the crisis on the fiscal sector is
manifested in a significant decline in the real level of public revenue and unsustainable
increase in the fiscal deficit. Foreign borrowings, as standard way of deficit financing in
Serbia leads to a drastic increase in the level of public debt in comparison with national
income. The consequences of this scenario are record- high interest rates, declining
investment, reducing the potential medium-term growth rates and the threat of a debt crisis:
the termination payments or debt restructuring.
Doctoral dissertation examines the causes of t...he fiscal deficit. It analyses its longterm
consequences and examines to which extent the government and the private sector are
forced to borrow from their own country and abroad. The impact of fiscal deficits on
macroeconomic variables depends on the manner of its financing. Given the limited
opportunities for further foreign debt (gross external debt in 2012 was 97 % of GDP),
doctoral dissertation examines the necessity to cover the fiscal deficit by fiscal consolidation.
In addition, fiscal consolidation through expenditure reductions and revenue is politically
unpopular, while at the same time it leads to a decrease accumulative capacity of the
economy. Based on the empirical results, the aim of this paper is to show the perspective of
fiscal deficits in the Republic of Serbia and to show the possible ways of its funding in terms
of sustainability of public debt. Based on both extensive research material and the use of
numerous scientific research methods thesis points out the prospects of fiscal deficits in the
Republic of Serbia and the possible ways of its funding in terms of sustainability of public
debt. By analysing the movement of structural and cyclical fiscal deficit in the dissertation,
the effectiveness of fiscal policy in the Republic of Serbia and the foundation of knowledge
necessary policy actions of economic policy in the future are determined. Bearing in mind the
limited fiscal space in the Republic of Serbia, economic and institutional determinants of fiscal deficit are identified through quantitative analysis of the political, economic and
institutional determinants of fiscal deficit in the thesis. The fiscal deficit is largely structural
nature where it stands out as the primary cause of the size and structure of the coalition
government. The immediate factors that may cause the appearance and increase the fiscal
deficit are: growth of current spending, launching public investment since 2006 the tax cuts
and weakening financial discipline. The results of quantitative assessment of the effects of
alternative sources of financing fiscal deficit served as a basis for assessing the medium-term
sustainability of the fiscal position and the macroeconomic implications of fiscal adjustment
through tax policy and expenditure policy. The research was set aside as the optimal way of
financing the deficit for fiscal consolidation and expenditure side of the budget.
On a very similar methodological way the thesis carried out the analysis of (un)
sustainability of the public debt of the Republic of Serbia. Empirical evaluation of the level of
public debt and the traditional econometric methods clearly identify its determinations and
optimization from the standpoint of macroeconomic position.
The results are reported as a product of conceived objectives and tasks are
conditioned to a large extent to specific parameterization of the model in order to analyse the
fiscal deficit and public debt. So, there is a possibility that the modified parametrization and
conclusions were different. A key contribution of this paper lies in the definition and
application of modern analytical instruments for the empirical analysis, and the development
of scientific thought about the phenomena of the fiscal deficit and public debt.
