Municipal Strategic Capacity and Economic Resilience Under Global Instability: Panel Evidence from Vojvodina

Abstract

The global economic environment has become increasingly characterized by persistent instability, particularly in the post-2020 period marked by pandemic-related disruptions, energy market volatility, inflationary pressures, and geopolitical tensions. These developments have exposed structural vulnerabilities across economic systems and emphasized the importance of resilience not only at the national level but also within subnational institutional frameworks.

While existing literature extensively examines macroeconomic consequences of global instability, significantly less attention has been devoted to the role of local governments in mitigating external shocks. This research gap is particularly evident in transitional European economies, where institutional development remains uneven and local governance capacity varies considerably across municipalities.

This study examines whether municipal strategic capacity contributes to local economic resilience in the Autonomous Province of Vojvodina. The analysis focuses on the moderating role of municipal-level institutional capability in reducing the negative effects of global instability on local economic performance.

The empirical analysis is based on a balanced panel dataset covering municipalities in Vojvodina for the period 2015–2024. Indicators of economic performance, fiscal capacity, administrative capability, and strategic planning activity are integrated into a composite Municipal Strategic Capacity Index. A fixed-effects panel regression model is applied to estimate the interaction between global instability and institutional capacity at the municipal level.

The empirical results indicate that global instability has a statistically significant negative impact on local economic activity, particularly SME dynamics, employment stability, and investment intensity. However, municipalities characterized by higher strategic capacity demonstrate significantly stronger economic resilience, reflected in lower volatility of business activity and faster recovery following external shocks. The moderating effect is particularly pronounced during the 2022–2023 energy crisis period.

The findings contribute to the literature on economic resilience by highlighting municipal strategic capacity as an important institutional determinant of local economic stability. The results emphasize the importance of strengthening fiscal governance, administrative competence, and strategic planning systems in order to enhance resilience in transitional economies exposed to global shocks.