Dependent Monetary Regimes in the Balkans: Enlarging the “Varieties of Capitalism” Hypothesis

ABSTRACT

Among the recent or revisited assumptions in the literature, the “dependent capitalism” hypothesis has met growing interest and relevance in the context of the 2008 economic and financial crisis. The purpose of the present article is first to expand the scope of the dependence analysis to the Balkan countries, both members and non-members of the EU, and second, to demonstrate that dependence also appears in these countries in a differentiated way through another institutional form, not included in the initial theoretical framework of Hall and Soskice, monetary regimes. A monetary regime can be considered as a structuring institutional form, expressing the power relations between national and foreign actors. In the dependent capitalism case, where foreign capital prevails and the trade balance dynamics is determined by the capital account, one could expect that monetary regimes would be implemented in a way to protect the capital and interests of foreign investors in the long term, hence to delegate monetary sovereignty to the investor’s country of origin. In the first part of the paper, some theoretical and methodological aspects of the dependent capitalism in post-socialist countries and of the specific monetary regime on which it is based, are discussed. Then, in the second part, the dependence analysis is illustrated by the case studies of monetary regimes in the Balkans during the period from 1990 to 2015.

KEYWORDS:

• Varieties of capitalism
• dependent capitalism
• monetary regimes
• Balkan economies
• currency boards

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. The monetary sovereignty is actually an intricate category which has evolved over time, includes both positive and normative aspects and has rarely been in the focus of scholars’ attention in principle (Zimmermann, 2013).

2. It is notably the case of the VoC approach but not of the Régulation theory (Amable, 2003).

3. Such are the transitions from a bimetallism to a gold standard, subsequently to a gold-exchange and gold-dollar standards, as well as the floating rates in the 1970s, the European initiative of the European Currency Unit (ECU), the Euro, or the establishment of a CFA common currency in Africa, etc.

4. Cohen’s approach is applied to African monetary regimes in Masson and Pattillo (2005).

5. For instance, within the euro area, Germany has a nominally equal, but de facto significantly stronger monetary power than Estonia, Slovakia, or even Spain and Italy.

6. The analyses of the monetary regime by Le Vuolo and Pereira (2017) and Chena (2015) follow a similar theoretical direction emphasizing the institutional complementarities in the functioning of the Currency Board in Argentina.

7. See also Pejović (2003), Petrovic (2008), Kornai (2000), Aslund (2007), Csaba (2007, 2011), Innes (2014), Roaf et al. (2014), and Nenovsky and Mihaylova Borisova (2015).

8. In conflict with all EU directives.

9. About preference for foreign currencies in the Balkan region, see OeN (2015) and Scheiber & Stix (2009); about “dinarization” in Serbia, see National Bank of Serbia [NBS] (2015).

10. A review of the monetary regimes in Southeastern Europe is made in the collection of articles in Sevic (2002); also Nenovsky (2009).

11. According to Steve Hanke (2012), the IMF had insufficient expertise of the operation of a currency board and used it generally for political pressure and purposes (Indonesia and Russia refused to introduce a currency board).

12. For more details about the CB introduction, refer to Blanc (2007).

13. An in-depth comparative analysis of the three Baltic CBs is provided in Nenovsky et al. (2001).

14. Historical review of the CBs is made by Schuler (1992) and an exhaustive bibliography by Cross, Heft and Rodgers (2012). See also the example of an African currency board, in Djibouti, and subsequently currency boards in Hong Kong, etc. in Balino and Enoch (1997).

15. See Balino and Enoch (1997) and CBs experiences, summarized by Wolf et al. (2008).

16. The first IMF survey on Currency Boards and its effectiveness appeared at that time.

17. There are three ethnic communities: Bosnians (Muslim), Croatians (Catholics) and Serbians (Orthodox) and respectively three monetary zones (the Bosnian zone, the Croatian zone and the Republika Srpska’s zone).

18. A reason to believe that the first practical attempt at a CB dates back to 1994.

19. See also Ignatiev (2005), Nenovsky et al. (2001), and Nenovsky and Rizopoulos (2003).

20. See the Report on the Dinarization [Sic] of the Serbian Financial System from the National Bank of Serbia [NBS] (2015). The Dinar is the official Serbian currency.