The transmission mechanism and consequences from the Global economic crisis for the Macedonian economy

Abstract

The global economic crisis had a a significant impact on many economies in the world, especially on the smalland open economies where the transmission channels of the crisis had their own specifics. Therefore in thispaper we try to analyze the transmission mechanism of the global crisis in a small and open economy - theRepublic of Macedonia, which reveals some key points in which this group of countries is extremely vulnerablein terms of global distortions. The main transmission channels determined by the specific features of theMacedonian small and open economy are primarily the fall in global economic activity (especially the fall in theeconomic activity of our main trade partners); the disturbance in international capital markets, the loss ofinvestors’ confidence in markets and their risk aversion. The paper elaborates the main transmission channels,as well as their effects on almost every segment of the Macedonian economy: the real sector, financial sector,fiscal sector and the external sector.