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FINANCIAL STABILITY AND QUALITY OF LIFE

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 XI INTERNATIONAL
CONFERENCE
QUALITY SYSTEM
CONDITION FOR
SUCCESSFUL BUSINESS
AND COMPETITIVENESS
PROCEEDINGS

KOPAONIK, 17-19.05.2023
 CONTENTS

FINANCIAL STABILITY AND QUALITY OF LIFE

Nikola Fabris, Radoica Luburi .............................................................................................................................................................. 11
LIFE LONG LEARNING
Juhani Anttila ................................................................................................................................................................................................18
QX AND QM MATRIX AS PART OF QUALITY MAINTENANCE METHODOLOGY
Milan or evi ..........................................................................................................................31
EMERGENCE OF INDUSTRY 5.0 AND IMPORTANCE FOR MANAGEMENT - BIBLIOMENTRIC
ANALYSIS AQSS
Jovana Nikoli ..........................................................................................................................38
PRINCIPLES OF QUALITY AND BUSINESS EXCELLENCE IN FOREIGN TRADE IN ARMAMENTS AND
MILITARY EQUIPMENT
Emir Smajilovi , Vlado Radi , Nikola Radi ...................................................................................................................................... 47
LOGISTICS HOUSEKEEPING AS KPI TO GARANTEE HIGH SERVICE LEVEL
Milan or evi ........................................................................................................57
SMART CITIES AND MOBILITY TO IMPROVE QUALITY OF LIFE
Katarina Stojanovi , Branislav San anin ...........................................................................................................................................63
DEVELOPMENT OF SOLAR AIR DEVICE
Jovana Lazarevi Milena Gavrilovi S Petrovi .......................................................................................................................70
ANALYSIS OF INFLUENTAL GEOMETRIC PARAMETERS ON THE SAFETY FACTOR ON THE
SIDES OF GEAR PAIRS IN THE GEARBOX USING TAGUCHI METHOD
Milan Stanojevi , B Stojanovi , Nevena Bankovi ..................................................................................................................78
ASSESSMENT OF PROCESS QUALITY ON THE EXAMPLE OF A DRIVE GEAR
Predrag Pravdi , Violeta or evi , Jelena Eri Obu ina ..............................................................................................................88
 FINANCIAL STABILITY AND QUALITY OF LIFE
Nikola Fabris, PhD1
2
Radoica Luburi
Abstract: The financial system is stable when financial institutions operate well and are able to provide the
population and the economy with the resources and services necessary for their growth and development.
During a period of financial instability, a crisis spreads from the financial sector to the real sector, banks do
not finance profitable projects and payments delayed or not executed. This can lead to bank bankruptcies and
the real threat of a stock market crash and all of that very often leads to a recession. Therefore, financial
stability is fundamentally regarded as a common good. Today, numerous international institutions use their
own methodology and indicators to measure the quality of life. However, very few papers directly deal with
the impact of the factors that affect the quality of life indicators. The basic motivation of the authors of this
work was to fill this theoretical gap some extent and contribute to further investigation into this area.
Following the papers in which they dealt with the influence of money, and later, climate change on the quality
of life indicators, they decided to extend their analysis to the topic of financial stability. The analysis used the
new methodology of Eurostat, the "8+1 dimensions of quality of life". The impact of financial stability on the
individual quality of life indicators is analysed, which showed that financial stability, to a greater or lesser
degree, affects all nine of them.

Keywords: Financial Stability, Quality of Life, Key Indicators

JEL Classification: B40, D60, M50

1. INTRODUCTION
Financial stability can directly determine the health of the financial system and the economy as a
whole. Unstable finances are one of the main sources of financial concerns for people and can
significantly influence both their health and quality of life. Although a single definition of financial
stability does not exist, it usually refers to the ability of the financial system to withstand and improve
economic processes, deal with risks and absorb shocks.
The real value of financial stability becomes clear only during times of financial instability. During
these periods, banks are reluctant to finance profitable projects, asset prices deviate excessively from
their intrinsic values, and payments may not arrive on time. The authors have researched how the
financial instability affects all the indicators of the quality of life, which is a multifaceted and
multidimensional social and human phenomenon. Although it is often measured through different
economic and non-economic material indicators, it in reality includes various factors that affect what

1
Nikola Fabris, Central Bank of Montenegro and Belgrade Universtiy, Faculty of Economics and Business,
nikola.fabris@cbcg.me
2
Radoica Luburi Montenegro, radoica.luburic@cbcg.me
 Nikola Fabris, Radoica Lubu
people really value in life. It is a very subjective measure of happiness, which is a vital element of
many financial decisions. However, it contains both objective factors such as health and material
conditions and subjective factors including individual feelings of happiness, and satisfaction with life.
Individual preferences strongly determine the quality of life factors especially regarding material
situation, health, physical safety, family life, satisfaction with work, and free time.
Although various international institutions measure the quality of life based on their own

(2023), revised and adapted after the coronavirus pandemic as well as

the war in Ukraine. The most important indicators of this methodology include material living
conditions, productivity or main activity, health, education leisure and social interactions, economic
and physical safety, governance and basic rights, the natural and living environment and overall
experience of life.

2. FINANCIAL STABILITY AS ONE OF THE MOST IMPORTANT GOALS OF

ECONOMIC POLICY
The issue of financial stability has now been relevant for several decades but it has come into the
spotlight as of the Global Financial Crisis. What became clear at the peak of the crisis was that
financial instability is much more dangerous for modern economies than inflation, assuming, of
course, that it does not turn into hyperinflation. In inflationary conditions, the real economy and
financial systems can function with more or less difficulty, while in the conditions of financial
instability of real and financial flows. In addition, addressing financial
instability requires much more time and money than just lowering inflation.
Financial stability is a goal without a generally accepted definition and, unlike inflation cannot be
expressed numerically. In addition, it is an objective, which may not be analysed through only one
indicator but many that can differ from country to country, depending on the development and
importance of certain segments and institutions of the financial system.
Financial stability usually means the absence of banking crises or large fluctuations in financial
markets. According to Gjederm (2005), financial stability is achieved if households and enterprises
may obtain optimal consumption and investment over time in the conditions of a well-functioning
financial system that can intermediate between savers and borrowers, and redistribute risk in a
satisfactory manner, with an efficient allocation of real economic resources over time. The European
Central Bank (2023) defines financial stability as a condition in which the financial system which
comprises financial intermediaries, markets and market infrastructures is capable of withstanding
shocks and the unravelling of financial imbalances. This mitigates the prospect of disruptions in the
financial intermediation process that are severe enough to affect real economic activity adversely.
World Bank (2023) states that a stable financial system is capable of efficiently allocating resources,

natural rate, and eliminating relative price movements of real or financial assets that will affect
monetary stability or employment levels. FED (2023) indicates that inancial stability is about
building a financial system that can function in good times and bad, and can absorb all the good and
bad things that happen in the economy at any moment.
However, there are authors who have a somewhat different approach and who believe that it is not
possible to define financial stability, and that only financial instability is definable. According to
Ferguson (2003), it is a situation characterized by three factors:
- some important securities prices seem to have diverged sharply from what can be considered
their fair value,
- financial market functioning and credit availability have been significantly distorted,
- and
In essence, the approach to financial stability implies that economic policy creators analyse and use
available economic measures to prevent all those phenomena that may be a threat to financial stability.
 Nikola Fabris, Radoica Lubu
This approach usually includes two dimensions of financial stability: a micro dimension that looks at
risks from the aspect of individual financial institutions, and a macro dimension that looks at risks
from the aspect of the entire financial system. The goal of this two-dimensional approach is to assess
systemic risk properly, that is, the risk that the problem of illiquidity or solvency spreads from an
individual institution to the entire syste 2014).
A financial system includes a number of interconnected components: infrastructure (legal system,
payment system, accounting system, etc.), institutions (banks, insurance companies, institutional
investors, etc.), and the market. Poor functioning of just one of these components can jeopardise
financial stability. However, the failure or closure of individual financial institutions does not have
to be a sign of impaired financial stability but on the contrary, the result of market competition that
actually strengthens financial stability.
Today, most European countries have a Financial Stability Council in place, which usually consists
of the Governor of the Central Bank, the Minister of Finance, and representatives of regulators of
individual segments of the financial system. This body aims to coordinate the measures of various
institutions with a view to preserving financial stability.
A financial system is considered stable when financial institutions - banks, savings and loans, and
other financial product and service providers--and financial markets are able to provide households,
communities, and businesses with the resources, services, and products they need to invest, grow, and
participate in a well-functioning economy (FED, 2023). Major instability can lead to runs on banks,
hyperinflation, or even a stock market crash. It can severely shake confidence in the financial and
economic system (World Bank, 2023). That is why we opted for this approach here in order to analyse
how financial instability affects the quality of life.
With the globalis
financial instability, which can occur because of a crisis on important international financial markets
or regional markets to which the domestic financial market is largely connected. On the other hand,
however, globalisation can contribute to mitigating crisis impulses because they spread to a larger
number of countries and Fabris, 2010).

3. QUALITY OF LIFE AS A MULTI-LAYERED AND MULTIDIMENSIONAL SOCIAL

AND HUMAN PHENOMENON
Quality of life is a multi-layered and multidimensional social and human phenomenon that has been
increasingly attracting a lot of attention from researchers, economic policy makers, and individuals.
The level of interest in this topic increased after the Second World War with the growing
democratisation of modern society and a heightened awareness of economic inequality. It is a broad
concept that includes both objective factors such as health, material conditions and similar, as well as
subjective factors such as individual feelings of happiness, life satisfaction and the like.
As Investopedia (2023) points out, quality of life is a highly subjective measure of happiness that is
an essential component of many financial decisions. Quality of life factors vary depending on
personal preferences but most often include an individual`s material situation, health, safety, family
life, satisfaction with work, and free time. From a research point of view, the quality of life is a very
challenging and demanding interdisciplinary field, multi-layered, multidimensional and complex,
imbued with numerous and specific sociological, economic, cultur
and Fabris, 2019).
There is no single and unified definition of the quality of life but many that seek to describe this
phenomenon as well as possible. The Oxford Dictionary (2023) defines quality of life as the standard
of health, comfort, and happiness experienced by an individual or group. The World Health
Organization (2023) defines quality of life as an individual`s perception of their position in life in the
context of the culture and value systems in which they live and in relation to their goals, expectations,
 Nikola Fabris, Radoica Lubu
standards and concerns. According to the encyclopaedia Britannica (2023), quality of life is the
degree to which an individual is healthy, comfortable, and able to participate in or enjoy life events.
Today, there are large numbers of international institutions that measure the quality of life based on
their own methodology and indicators. For example, according to the U.S. News & World Report
(2023), the five countries with the highest ranked quality of life are: Sweden, Denmark, Canada,
Switzerland, and Norway (in this order). Of countries in the region, Croatia is ranked as 29th, Slovenia
is 49th, Serbia is 71st.3
The authors of this paper decided to use the latest Eurostat methodology (2023) 8+1 dimensions
of quality of life slightly modified after the coronavirus pandemic and the war in the Ukraine. The
most important indicators of this methodology and their sub-dimensions are presented in the
following table.
Table 1. Eurostat`s quality of life indicators
Indicator Sub-dimensions of indicator
Material living conditions Income
Consumption and
Material conditions
Productivity or main activity Quantity of employment
Quality of employment
Other main Activity
Health Life expectancy
The number of healthy life years
Subjective assessment of own health
Education Population educational attainment
Self-assessed and assessed skills
Participation in life-long learning
Opportunities for education
Leisure and social interactions Leisure activities
Social activities
Economic and physical safety Physical safety
Economic safety
Governance and basic rights Trust in institutions and public service
Discrimination and equal opportunities
Active citizenship
Natural and living environment Subjective environment-related indicators
Objective environment-related indicators
Overall experience of life Life satisfaction
Affect (personal feeling of emotional states)
Eudaemonics (sense of having meaning of purpose in a life)
-
https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Quality_of_life_indicators_-
_measuring_quality_of_life
4. IMPACT OF FINANCIAL INSTABILITY ON THE QUALITY OF LIFE
As described in the second part of the paper, the real effects of financial stability are seen only in
times of financial instability. That is why the authors have decided to look at how financial instability
affects certain indicators of the quality of life. The impacts of financial instability on individual
quality of life indicators from the perspective of strength of their impact are systematized and
presented in the table below.

3
Montenegro and Bosnia and Herzegovina are not ranked in this research.
 Nikola Fabris, Radoica Lubu
Table 2. Financial instability impact on quality of life indicators
Indicator Potential impact channels
Big impact
Productivity or main Lower investment activity
activity Negative impact on productivity
Employment decline
Material living Income decrease
conditions Consumption and living standard decline
Economic growth slowdown due to a decline in aggregate demand
Economic and physical Loss of savings
safety Inability to access loans
Risk of job loss
Health Stress as a trigger of numerous diseases
Reduced possibilities of financing private treatment
Shortening of life expectancy
Overall experience of Life satisfaction
life Emotional crisis
Questioning the meaning of purpose in life
Lower impact
Education Reduced possibilities for financing education
Natural and living Reduction of donor support from banks for environmental protection
environment projects
Taking less care when lending to companies whose operations have negative
environmental consequences
Leisure and social Less spare time
interactions Stress-induced difficulties in engaging in social interactions
Governance and basic Loss of trust in system institutions
rights
Source:
When we talk about the Productivity or main activity indicator, then financial instability can have a
big impact. This influence can be particularly manifested through reduced wholesale lending by
banks, which is a very realistic scenario if banks find themselves in serious financial difficulties. This
can lead to denied access to investment loans, which makes it difficult to make new investments that
create employment growth, the acquisition of new equipment that could drive productivity growth,
all ultimately leading to a slowdown in overall economic growth. It can be a particularly dangerous
situation if, due to financial instability, a company cannot access loans for liquidity or working
capital, which can force the company to reduce the scope of its activities and potentially lay off a
number of employees. Accordingly, in order to safeguard financial stability, it is crucial to build a
robust institutional framework, develop effective macroprudential and other economic policies, and
provide effective coordination am , 2016).
In addition, financial stability has a great influence on the Material living conditions indicator. A
particularly dangerous situation can be if companies become forced to reduce the number of
employees and the level of their earnings due to financial instability of the banking system. This
certainly has a negative impact on their level of consumption and living standard and, if the volume
of consumer loans further declines, all this can lead to additional significant decline in aggregate
demand. As the Keynesian theory points out, a drop in aggregate demand is one of the most important
reasons for the slowdown in economic growth and a country`s entry into recession.
When it comes to Economic and physical safety, the authors of the paper have identified a potentially
significant impact on the first element of this indicator that is economic safety. The economic safety
of individuals as a consequence of financial instability may be threatened through at least three
channels. The first channel is the loss of personal savings if the bank is unable to pay them back due
to jeopardized financial stability. The second channel refers to the difficulty in obtaining a loan if an
 Nikola Fabris, Radoica Lubu
individual needs it, particularly if it is needed for some unforeseen situations such as the costs of
repairing damage caused by fire, flood, car breakdown, and the like. The third possible channel is
through the risk that an individual is without income due to job loss, which is described in the
Productivity or main activity indicator.
Financial instability can have a major impact on the health of individuals through multiple channels.
For example, if financial instability causes a bank where an individual keeps their savings to go
bankrupt, this can lead to significant stress. A study by Sun Trust Bank showed that lack of money is
the leading cause of stress (Tessler, 2016). A large number of studies have confirmed the connection
between stress and a large number of diseases. In addition, the loss of financial resources can mean
that an individual has limited possibilities of financing private treatment because, unfortunately, the
public health systems in most countries in the region are not at satisfactory levels. All this can lead to
a reduction in life expectancy, one of the most important components of this indicator.
We have also identified a significant impact when it comes to the indicator Overall experience of life.
Financial instability can affect life satisfaction and emotional state to a great extent. We have already
shown that financial instability can lead to the loss of an individual`s savings, the loss of employment,
a decrease in income, less free time, a decrease in living standard, all representing stress triggers and
leading to the general dissatisfaction of the individual. Of course, all this can cause individuals to
question the meaning of life and their role in this uncertain and turbulent world.
Financial instability also affects education, as one of the indicators of the quality of life, but this
impact is probably somewhat smaller than in the case of indicators indicated above. Financial
instability may lead to lower credit support for citizens, which could mean that there may be a limited
supply of credit for all types of education (both formal and informal). However, bearing in mind that
public education systems in most countries in the region are usually better than the private ones, as
well as that loans for education in these countries are much less common than in some developed
countries with expensive and high-quality private education (e.g. the USA and Great Britain) this is
not too much of an impact.
Financial instability has a small impact on the Natural and living environment. In this paper are
identified two possible channels of influence. The first one is related to the fact that certain banks
sponsor various environmental initiatives as part of their social responsibility mission. Financial
instability can have a very negative effect on the profitability of banks as in such circumstance, as a
rule, the budget for donor activities is the first to get cut. Another possible channel is the financing of
companies whose activity has a negative impact on the environment. Although there has been more
debate in recent years about the inclusion of climate and environmental risks in credit risk
management in the banking system, this has not been implemented in the majority of countries in the
region although some banks have done so on a voluntary basis or under the influence of their parent
banks. Against the backdrop of financial instability, the number of quality clients may decline so this
could also motivate banks to lend to some companies that base their operations on certain dirty
technologies, such as carbon.
When it comes to Leisure and social interactions, the authors of the paper have classified this
indicator in the category of less impacted by financial instability. Namely, if financial instability for
any reason leads to a decrease in the income of individuals, they will be forced to look for additional
income, which will result in a decrease in their spare time. Furthermore, if financial instability leads
to increased stress for an individual due to any of the reasons described above, this could mean that
the individual will engage in social interactions to a lesser extent.
The Governance and basic rights indicator is identified in this paper as having a smaller impact
on financial instability, too. First of all, it can be manifested through the loss of trust in the

timely manner and at minimum costs. A deficiency of an effective and resilient governance
structure and issues such as data integrity, immutability and privacy could become sources of
, 2020).
 Nikola Fabris, Radoica Lubu

6. CONCLUDING REMARKS
When individuals, organisations and society as a whole live in financially stable times, the conditions
for achieving a better quality of life become much more favourable. Unstable finances are the key
cause of financial worries for people, which can greatly affect both their health and quality of life. In
the times in which we live, characterised by climate change, natural disasters, epidemics and
pandemics, the war in Ukraine, global inflation and with the increasing acceleration of change, the
key question is whether and to what extent we can maintain financial stability and quality of life.
Standard macroeconomic indicators, traditionally used as the measures of well-being of an economy,
are not always able to give a real and complete picture of the degree of financial stability and its
impact on the perception of quality of life in different countries. This research demonstrates that
financial stability positively affects many of the key indicators of people's living standards and their
overall quality of life while the financial instability negatively affects their lives. Analysing the impact
of financial instability on individual quality of life indicators from the perspective of strength of their
influence, authors have concluded that five of them produce a greater impact while the rest have
minor effects. The following indicators, Productivity or main activity, Material living conditions,
Economic and physical safety, Health and Overall experience of life, are considered as potentially
the most affected by financial instability.
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of Central Banking Theory and Practice, 3 (1), 27-41
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INTERNATIONAL Conference Quality System Condition for Successful Business and

Competitiveness (11 ; 2023 ; Kopaonik)
Proceedings [Elektronski izvor] / XI International Conference Quality System Condition for
Successful Business and Competitiveness, Kopaonik, 17-19.05. 2023 ; [organizer] Association for
Quality and Standardization of Serbia ; [editorial boar
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