Abstract:In recent two decades, due to contributions of political macroeconomics, the focus of macroeconomics turned away from a narrow perspective based on market and privatisation (market fundamentalism) towards a broader perspective based on institutions and values (institutionalism). Within the institutional paradigm, the emphasis nowadays is put on inclusive institutions. The main thesis of one of leading proponents of political macroeconomics, D. Acemoglu, is: "growth is much more likely under inclusive (economic and political) institutions than extractive institutions." Good institutions are characterized by three attributes: 1) they establish and protect property rights; 2) they restrict social elites which strive to expropriate income and property of others members of society; 3) they provide equal chances for employment, social security and civil rights to all individuals. Good institutions contribute to political stability, successful macroeconomic policy, and enhance initiatives. The key role of institutions is to secure stability and continuity. Extractive institutions can negatively affect entrepreneurship and entire economic development in two ways: a) by increasing the opportunity cost, resulting in upward movement of the opportunity cost curve; and b) by affecting return to entrepreneurship resulting in leftward movement of the return to entrepreneurship curve. Apart from independence and accountability of institutions what is needed is sufficient level of inclusion. Inclusion should encompass three dimensions: personal, financial, and political. The introduction of principles of independence, accountability, and inclusion is essential for emergence and performance of all institutions.

Bosnia and Herzegovina have significant physical potential regarding to renewable energy sources. Hydro, biomass, geothermal, wind, and solar potential can play important role in the whole state economy. Bosnia and Herzegovina is Non-Annex I country according to UNFCCC and according to that it is obligated to participate in the global efforts in order to reduce green house gases emission. This paper gives some analysis of the physical, technological, economic, and market potential of renewable energy sources in Bosnia and Herzegovina and their potential role in mitigation of climate changes. Paper also gives the analysis of the potential connections between renewable energy sources and sustainable development of the economy, taking in to consideration specific political structure of the state. Bosnia and Herzegovina is consisting from two entities: Republic of Srpska and Federation of Bosnia and Herzegovina, and Brcko District; energy sector and climate changes mitigation measures are under their jurisdiction. According to that some of this paper results can be useful for the improvement of entity and state strategies with the final aim to place renewable energy sources on the right position, as some of the major economy drivers, not only in Bosnia and Herzegovina, but in whole region.

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One of the crucial fiscal sustainability preconditions is fulfilment of budget constraint. We applied the approach of budget revenue and expenditure cointegration in some EU candidate countries, because of the reliability of this method for the observed countries. This is the first research of this topic in the majority of these countries based on the above-mentioned methodological set. We showed that weak fiscal sustainability is immanent to Serbia. In Albania and Turkey, we could not find budget sustainability evidence. Our results are very important to economic policy makers in these countries, but also are of special concern to EU bodies in the European integration process. This is emphasised because of reported public debt crisis and macroeconomic spillovers in the European Union.

This study deals with important issues related to the new political macroeconomics and its appliance to the economic movements in Serbia, which is a country of “new democracy” as well as with transition economy. In political macroeconomics, it is a known fact that the economic policy instruments can be used for political purposes - simulated improvement of economic indicators to win the elections. These options assume specific features in transition economies, such as the Serbian economy. The political instability in Serbia, reflected in frequent elections, as well as in the diversity in political and economic goals of the key political parties leading to increasing political uncertainty in both the pre-election and post-election periods, weakened the economic system. Simultaneously, using the economic policy for political purposes to support the “pro-democratic” and “pro-European” parties proved to be paradoxically justified