Advanced Search
MyIDEAS: Login to save this book chapter or follow this series

Challenges of macroeconomic stability: a speed limit on Croatia's accession to the european Union?

In: Croatian Accession to the European Union: Institutional Challenges

Contents:

Author Info

  • Dubravko Mihaljek

    (Bank for International Settelments, Basel)

Abstract

This paper analyses three issues that could potentially affect macroeconomic stability and hence the speed of Croatia’s accession to the European Union (EU): (i) Can the economy continue to rely on domestic demand as the main source of growth or is stronger reliance on exports necessary in the medium term? (ii) Is the external current account deficit in Croatia “excessive” and how have high deficits been corrected in the past? (iii) Does the expansion of bank credit to the private sector carry the seeds of macroeconomic instability? The paper argues that clearer signs of healthier growth have emerged since 2000, and that the Croatian economy should be able to adjust to the widening external deficit in 2002–03 in an orderly manner. However, there are reasons to be concerned about the expansion of private sector credit, as recently it has been financed largely by foreign borrowing. Large capital inflows are likely to become the main challenges for macroeconomic policy in the run-up to Croatia’s EU accession. Policy makers will in particular have to address the so-called “Tošovský dilemma”, i.e., set interest rates at an appropriate level: setting them too high would invite excessive short-term inflows, while setting them too low would lead to excessive investment and thus inflation.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ijf.hr/eng/EU2/Mihaljek.pdf
Download Restriction: no

Bibliographic Info

as in new window

This chapter was published in:

  • Katarina Ott (ed.), 2004. "Croatian Accession to the European Union: Institutional Challenges," Books on Croatian accession to the European Union, Institute of Public Finance, volume 2, number 2, Diciembre.
    This item is provided by Institute of Public Finance in its series Chapters in books with number 2-02.

    Handle: RePEc:ipf:chaptr:2-02

    Contact details of provider:
    Postal: Smiciklasova 21, 10000 Zagreb
    Email:
    Web page: http://www.ijf.hr/
    More information through EDIRC

    Related research

    Keywords: Croatian economy; enlargement of the European Union; transition economies; macroeconomic stability; economic growth; current account reversals; bank lending; banking system vulnerability; capital inflows;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Asli Demirgüç-Kunt & Enrica Detragiache, 1997. "The Determinants of Banking Crises," IMF Working Papers 97/106, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ipf:chaptr:2-02. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martina Fabris).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.