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Economic uncertainty and its impact on the Croatian economy

Author

Listed:
  • Petar Soric

    (University of Zagreb, Faculty of Economics and Business Zagreb, Zagreb, Croatia)

  • Ivana Lolic

    (University of Zagreb, Faculty of Economics and Business Zagreb, Zagreb, Croatia)

Abstract

The aim of this paper is to quantify institutional (political and fiscal) and non-institutional uncertainty (economic policy uncertainty, Economists’ recession index, natural disasters-related uncertainty, and several disagreement measures). The stated indicators are based on articles from highly popular Croatian news portals, the repository of law amendments (Narodne novine), and Business and Consumer Surveys. We also introduce a composite uncertainty indicator, obtained by the principal components method. The analysis of a structural VAR model of the Croatian economy (both with fixed and time-varying parameters) has showed that a vast part of the analysed indicators are significant predictors of economic activity. It is demonstrated that their impact on industrial production is the strongest in the onset of a crisis. On the other hand, the influence of fiscal uncertainty exhibits just the opposite tendencies. It strengthens with the intensification of economic activity, which partially exculpates the possible utilization of fiscal expansion as a counter-crisis tool.

Suggested Citation

  • Petar Soric & Ivana Lolic, 2017. "Economic uncertainty and its impact on the Croatian economy," Public Sector Economics, Institute of Public Finance, vol. 41(4), pages 443-477.
  • Handle: RePEc:ipf:psejou:v:41:y:2017:i:4:p:443-477
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    References listed on IDEAS

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    Cited by:

    1. Oscar Claveria & Enric Monte & Salvador Torra, 2018. "“A geometric approach to proxy economic uncertainty by a metric of disagreement among qualitative expectations”," IREA Working Papers 201806, University of Barcelona, Research Institute of Applied Economics, revised Mar 2018.

    More about this item

    Keywords

    economic uncertainty; Economic Policy Uncertainty Index; VAR model with time-varying parameters;

    JEL classification:

    • E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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