Abstract:
In this thesis, we analyze the impact of fiscal policy on financial stability, using the
Western Balkans region as a case study. The research includes 6 countries in the Western
Balkans region, while the research period is 14 years (2020-2023). The source of
secondary data is from the World Bank, IMF, The Global Economy, as well as statistical
agencies of 6 countries. A total of 4 econometric models (OLS, OLSR, FE and RE) were
used, where the Hausman test was used to select the most reliable model. The findings
show that the Western Balkan region has moderate financial stability, with an average of
44.10. Real interest rates (4.54%) and inflation (3.10%) indicate economic stability.
Correlation analysis showed a significant negative relationship between financial stability
and inflation rate (r=-0.464, p <0.01), public debt (r=-0.455, p <0.01) and unemployment
(r=-0.406, p <0.01), while based on the results of regression analysis real interest rates
positively affect FSI (B = 0.14, p = 0.004), while inflation and unemployment show a
statistically significant impact.