Analysis of the impact of the change in credit rating and outlook on FDI inflow and economic activity in Serbia

Emilija Jankovic, Stojan Jankovic and Andrea Jovic, Emilija Jankovic, Stojan Jankovic and Andrea Jovic
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Emilija Jankovic: National Bank of Serbia
Stojan Jankovic: National Bank of Serbia
Andrea Jovic: National Bank of Serbia

Working Papers Bulletin from National Bank of Serbia

Abstract: Following S&P’s decision in October 2024 to raise Serbia’s credit rating to investment grade (BBB–) for the first time in its history, the question arises regarding the manner in which changes in the credit rating level and outlook may impact key macroeconomic indicators. For this purpose, we conducted research analysing the short- and long-run impact of change in the rating awarded by the three leading international agencies (S&P, Fitch and Moody’s) on FDI inflow and economic activity in Serbia (approximated by the industrial production index). For the econometric analysis, we used linear and non-linear autoregressive distributed lag models ((N)ARDL) confirming the initial thesis that an improvement in the credit rating can have a significant impact on higher FDI inflow and industrial production growth in Serbia in both short and long run. This supports a more favourable investment and business environment, and a better living standard for citizens, contributing to sustainable economic growth over the long term.

Keywords: credit rating; investment grade; FDI; industrial production; ARDL (search for similar items in EconPapers)
JEL-codes: F21 G15 G24 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2025-03
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