The South East European Journal of Economics and Business

DIGITALIZATION’S EFFECT ON INTERNATIONAL REMITTANCES: THE HINDRANCE OF INSTITUTIONAL QUALITY IN ADVANCED ECONOMIES

2025-07-22T18:52:28+00:00

Digital technology is crucial in reshaping economies by diminishing transactional barriers and fostering economic expansion. Concurrently, international remittance inflow is a potent tool for poverty alleviation and employment enhancement. The paper’s objective is to explore the impact of digitalization on international remittances within advanced economies and to analyze how the level of institutional development influences this relationship. The research utilizes Internet user rates and fixed broadband subscription statistics as indicators of digitalization and the difference GMM estimators for a panel dataset of 34 developed countries from 2002 to 2021. The results present a counter-intuitive that digitalization and governance promote international remittances, but their interaction terms reduce these remittances. Furthermore, trade openness enhances remittances, while economic growth impedes them. From these findings, some policy lessons are suggested to look for insights into the role of institutional quality in the digitalization–international remittances nexus.

IS COST COMPETITIVENESS A SUFFICIENT DRIVING FORCE FOR CROATIAN EXPORTS?

2025-07-22T18:56:28+00:00

This paper examines the extent to which Croatia relies on a cost-based export strategy by analyzing the link between cost competitiveness, measured by unit labor cost (ULC) and exports of manufacturing firms from 2002 to 2022. Using a panel first-differences OLS approach, the study finds that cost competitiveness significantly shapes export activity of firms of all sizes and technological intensities, but with considerable heterogeneity. The results show a non-linear relationship between ULC and exports that is not asymmetrical. The relationship is weaker for firms with lower export intensity and for high‐tech firms. Higher ULC is associated with greater export sensitivity and lower productivity, confirming that export sensitivity is lower for more productive firms. In the future, a further strengthening of the link between costs and exports can be expected, i.e. exports will react more sensitively to cost fluctuations. As a result, price and cost stability will become even more crucial. Overall, this analysis provides the most comprehensive study to date on how cost factors affect Croatian merchandise exports, implying that boosting product quality and productivity can reduce cost pressures and promote long-term competitiveness.

THE DYNAMIC INTERPLAY BETWEEN CREDIT RISK AND MONETARY POLICY IN ALBANIA’S BANKING SECTOR: A COMPREHENSIVE ANALYSIS

2025-07-22T19:01:25+00:00

The study examines the relation between credit risk and monetary policy in Albania’s banking sector from 2015 to 2023, utilizing the Autoregressive Distributed Lag (ARDL) model. It analyzes post-crisis developments, particularly the Central Bank’s (CB) stabilization efforts and the write-off of NPLs. The findings show that higher CB rates increase NPLs in the short and long term. Following the 2008 financial crisis and the COVID pandemic, measures such as NPL write-offs and loan repayment postponements helped mitigate credit risk. Inflation contributed to credit stability by easing debt repayment burdens. Inflation and higher rates ease debt repayment and enhance credit stability. The Loan/Deposit Ratio influences NPLs, as managed decreases in LDR lower credit risk. Additionally, increased CB rates reduce new loan issuance, deterring high-risk borrowers and curbing NPL growth. The study highlights the effectiveness of Albania’s monetary policy in
maintaining banking sector stability and supporting economic recovery.

PRODUCT-LINE DIVERSIFICATION AND FINANCIAL PERFORMANCE: THE CASE OF THE MACEDONIAN NON-LIFE INSURANCE MARKET

2025-07-22T19:04:24+00:00

This study investigates the relationship between product-line diversification and financial performance among non-life insurers in North Macedonia over the period 2013–2022. Drawing on firm-level data and applying fixed and random effects two-stage least squares (IV-2SLS) models, we examine whether diversification improves profitability in a market characterized by low insurance culture and heavy reliance on the regulated motor third-party liability (MTPL) segment. We use two diversification measures: the Herfindahl-Hirschman Index (HHI) of insurers’ product portfolios and a weighted HHI adjusted for market competition across lines of business. Our findings reveal a nonlinear relationship between diversification and profitability, supporting the coexistence of both diversified and specialized insurers. While initial diversification appears beneficial, excessive diversification may reduce returns, and evidence linking diversification away from competitive lines (e.g., MTPL) to higher profitability is weak. These insights carry important policy implications, suggesting that a measured liberalization of the MTPL market could support healthier diversification dynamics, while highlighting the need for careful monitoring of risk underpricing and solvency risks in evolving product strategies.