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Coherence of Business Cycles and Economic Shocks between Croatia and Euro Area Member States

Author

Listed:
  • Karlo Kotarac

    (The Croatian National Bank, Croatia)

  • Davor Kunovac

    (The Croatian National Bank, Croatia)

  • Rafael Ravnik

    (European Central Bank)

Abstract

The paper analyses the coherence of business cycles and supply and demand shocks between Croatia and euro area core countries. The results obtained point to several basic conclusions. Firstly, the coherence of business cycles and the correlation of supply and demand shocks between Croatia and euro area core countries are relatively high. Secondly, symmetric (common) shocks are dominant for explaining the dynamics in domestic GDP, while the contributions of asymmetric shocks are significantly smaller. Thirdly, the results point to the convergence of supply and demand shocks and business cycles between Croatia and euro area core countries. Based on all of the above, we may conclude that the introduction of the euro and the related adoption of the common countercyclical monetary policy should not result in significant costs for the Croatian economy.

Suggested Citation

  • Karlo Kotarac & Davor Kunovac & Rafael Ravnik, 2017. "Coherence of Business Cycles and Economic Shocks between Croatia and Euro Area Member States," Working Papers 53, The Croatian National Bank, Croatia.
    • Handle: RePEc:hnb:wpaper:53
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    File URL: http://www.hnb.hr/repec/hnb/wpaper/pdf/w-053.pdf
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    References listed on IDEAS

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    5. Gert Peersman, 2011. "The Relative Importance of Symmetric and Asymmetric Shocks: The Case of United Kingdom and Euro Area," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73(1), pages 104-118, February.
    6. Saša Obradović & Vladimir Mihajlović, 2013. "Synchronization of Business Cycles in the Selected European Countries," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(6), pages 759-773, December.
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    Citations

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    Cited by:

    1. Arčabić, Vladimir & Škrinjarić, Tihana, 2021. "Sharing is caring: Spillovers and synchronization of business cycles in the European Union," Economic Modelling, Elsevier, vol. 96(C), pages 25-39.
    2. Milan Deskar-Škrbiæ & Antonija Buljan & Mirna Dumèiæ, 2020. "Real interest rate convergence and monetary policy independence in CEE countries," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 38(2), pages 349-380.
    3. Milan Deskar-Škrbić & Davor Kunovac, 2020. "Twentieth Anniversary of the Euro: Why are Some Countries Still Not Willing to Join? Economists’ View," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 62(2), pages 242-262, June.
    4. Ozana Nadoveza Jelić & Rafael Ravnik, 2021. "Introducing Policy Analysis Croatian MAcroecoNometric Model (PACMAN)," Surveys 41, The Croatian National Bank, Croatia.

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    More about this item

    Keywords

    cycle coherence; aggregate supply and demand shocks; symmetric and asymmetric shocks;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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