1. FINAL DEMAND Y = C + I + G + (E-IM)

2. THE EXPENDITURE STRUCTURE OF GDP 2008 and 2009 EU27 Slovenia SEE 200820092008200920082009 Private consumption57.558.453.055.486.179.2 Govt. consumption20.822.4 18.120.318.819.9 Gross investments21.418.2 31.923.024.123.0 Trade balance 0.5 1.1 -3.0 1.3-34.8-22.6 Exports 41.336.5 67.458.123.129.9 - Imports-41.0 -35.6-70.4-56.8-57.9-52.5 GDP 100100100100100100

3. THE FINAL DEMAND STRUCTURE % GDP (2008) C+GIIMEXEX-IM Croatia78.728.950.442.8 -7.6 Macedonia94.624.272.353.4 -18.9 Albania90.536.254.928.2 -26.7 BiH100.527.460.732.9 -27.8 Montenegro108.533.886.744.4 -42.3 Serbia95.828.254.330.3 -24 Kosovo1142650.310.4 -39.9

4. AGGREGATE CONSUMPTION FUNCTION C = a + b * Yd C = a + b * (Y-T) a – autonomous expenditures a > 0 b – marginal propensity to consume0 < b <1 M = 1/(1-b) – multiplierM > 1 Equilibrium in the simplest economy C = a + b*Y, Y = C; Y = a + b*Y; (1-b)*Y = a Y = a/(1-b)

5. AGREGATE CONSUMPTION FUNCTION Multiplier : (Y1-Y0)/(a*-a) a C=Y Y C=a+b*Y Y0 C0 Y1 a*

6. THE EXPENDITURE STRUCTURE C i =A*Y a Engel curves a - income elasticity of demand a < 0; inferior goods, if income increases, the quantity bought decreases 0 < a < 1; if income grows the share a good in expenditures decreases; a > 1; superior goods, if income grows the share of a good increases

7. THE EXPENDITURE STRUCTURE EU27 and Slovenia EU27 Slovenia 200820081988 Food, beverages, tobacco16.319.432.4 Clothing&footwear 5.4 5.710.0 Housing&housing appliances22.218.426.9 Transport&communications16.119.311.9 Health&education 4.6 4.8 0.7 Recreation&culture 9.2 9.6 5.2 Miscelaneous goods&services26.222.813.0

8. INVESTMENTS Notions: gross, net; in fixed assets, in inventories; Agregate Investment Function: I t = F (r t, Q t - Q t-1, K t ) r – neoclassical explanation dQ – neokeynesian explanation Interest rate and rate of returns to investments; Present value of future income flows, remuneration for postponed consumption; Risks: business, financial, exchange rate, country; - Supply and demand of capital and financial assets;

9. EXPORTS AND IMPORTS Introduction: absolute (Smith) in relative (Ricardo) comparative advantages; Hechscher-Ohlin explanation; domestic, foreign and world market; Restrictions; custom duties and quatitative restrictions, quotas; The size of the country and the importance of trade Aggregate export and import functions The structure of trade: regional in production structure Gravity model: X ij = f (GDP i, GDP j, (GDP/capita) j, Distance i j ) The relevance of comparative advantages theory

10. WORLD TRADE

11. BALANCE OF PAYMENTS EU27 bill. € 2006200720082009 Current account-146.2-127.2-243.3-131.8 Goods-163.8-156.2-205.0 -86.3 Services 70.6 87.8 86.2 64.0 Incomes 1.1 -2.2 -66.9-49.3 Transfers -54.1-56.6-57.6-60.2 Capital account -11.0-15.9-8.4-7.6 Direct investments-74.4-107.3-177.9-67.3 Portfolio investments241.0352.3806.3443.0 Other investments-91.8 53.8-609.2-272.2

12. CURRENT ACCOUNT AND FDI CountryCA/GDPFDI/GDPstock FDI/GDP ten years averages19942003 Czech Republic -4.055.8011.048.0 Estonia -7.466.03 9.277.6 Hungary -4.404.3117.151.8 Latvia -5.485.96 7.635.1 Lithuania -8.363.42 0.727.2 Poland -2.642.73 4.124.9 Slovakia -6.373.44 6.131.5 Slovenia -0.511.04 9.220.7 Average -4.914.10 9.339.6

13. THE FDI FINANCIAL LIFE CYCLE € EntryGrowth Repatriation of profits Profits Reinvested Profits Dividends SloveniaCzechRepublic Hungary Ireland

14. CAPITAL FLOWS IN CEE COUNTRIES

15. CAPITAL FLOWS IN CEE COUNTRIES DURING THE CRISIS