The influence of international financial liberalization on the monetary stability of the Republic of Serbia

Abstract

Financial innovations have largely contributed to the development of the financial markets worldwide. Due to the Global Financial Crisis there has been impairment of financial instruments and their derivatives. One of the consequences of the crisis is distrust between subjects on the financial market and impossibility of easy access to the sources of financing. Direct foreign investments in all forms are still the most optimal and necessary form of capital placement in the domestic economy. At this moment Serbia should work on the establishment and maintenance of the optimal business environment. The New Consensus Macroeconomics provides this opportunity. Within the circumstances of global instability, inflation targeting has a function to increase competitive advantage of the country. International financial liberalization has caused the instability of financial market regardless of the possibility of identification and managing financial risks. Openness and interdependence of national economies have led to global economic instability. Serbia, like other developing countries, must carry out cyclical monetary policy in order to maintain economic and financial stability.

Keywords

• national competitiveness
• nbs
• monetary mechanism
• the new consensus macroeconomics
• foreign exchange risk
• financial markets
• financial instruments