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Preserving economic and financial stability in an emerging market country during the pandemic crisis: Croatia’s experience

Author

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  • Mislav Brkic

    (Croatian National Bank, Zagreb, Croatia)

Abstract

The Croatian authorities’ response to the pandemic crisis was considerably greater in size and scope than their reaction to the 2008-09 global financial crisis. This paper aims to identify the main factors that allowed the authorities to respond so ambitiously this time. In particular, the paper explains how solid macroeconomic fundamentals backed by a steady inflow of EU funds enabled the Croatian government and the Croatian National Bank to take bold steps to restore stability in key financial markets and provide liquidity support to the economy without compromising currency stability and fiscal sustainability. In addition, as an EU member state, Croatia was in a position to benefit from a currency swap line with the ECB, as well as from the EU’s common recovery facility, which reduced concerns about the pandemic-induced rise in government debt. Finally, the paper identifies some positive external factors that were beneficial for all emerging market economies.

Suggested Citation

  • Mislav Brkic, 2022. "Preserving economic and financial stability in an emerging market country during the pandemic crisis: Croatia’s experience," Public Sector Economics, Institute of Public Finance, vol. 46(3), pages 321-354.
    • Handle: RePEc:ipf:psejou:v:46:y:2022:i:3:p:321-354
    DOI: 10.3326/pse.46.3.1
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    References listed on IDEAS

    as
    1. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1, March.
    2. Mislav Brkić & Ana Šabić, 2014. "Framework for Monitoring Macroeconomic Imbalances in the European Union - Significance for Croatia," Surveys 17, The Croatian National Bank, Croatia.
    3. repec:imf:imfdps:2021/021 is not listed on IDEAS
    4. Corradin, Stefano & Grimm, Niklas & Schwaab, Bernd, 2021. "Euro area sovereign bond risk premia during the Covid-19 pandemic," Working Paper Series 2561, European Central Bank.
    5. Christina D. Romer, 1993. "The Nation in Depression," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 19-39, Spring.
    6. Tomislav Galac, 2010. "The Central Bank as Crisis-Manager in Croatia – A Counterfactual Analysis," Working Papers 27, The Croatian National Bank, Croatia.
    7. Haroutunian, Stephan & Osterloh, Steffen & Sławińska, Kamila, 2021. "The initial fiscal policy responses of euro area countries to the COVID-19 crisis," Economic Bulletin Articles, European Central Bank, vol. 1.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    monetary policy; fiscal policy; COVID-19; international reserves; financial crisis;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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