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Economic uncertainty and its impact on the Croatian economy

Author

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  • 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
    DOI: 10.3326/pse.41.4.3
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    2. Barišić, Patrik & Kovač, Tibor & Arčabić, Vladimir, 2023. "More than just supply and demand: Macroeconomic shock decomposition in Croatia during and after the transition period," Structural Change and Economic Dynamics, Elsevier, vol. 67(C), pages 420-438.
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    4. Morão, Hugo, 2024. "An economic policy uncertainty index for Portugal," International Economics, Elsevier, vol. 178(C).
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    6. Oscar Claveria & Enric Monte & Salvador Torra, 2019. "Economic Uncertainty: A Geometric Indicator of Discrepancy Among Experts’ Expectations," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 143(1), pages 95-114, May.
    7. Hamish Burrell & Joaquin Vespignani, 2021. "The Industrial Impact of Economic Uncertainty Shocks in Australia," Economic Papers, The Economic Society of Australia, vol. 40(3), pages 248-271, September.
    8. Oscar Claveria, 2021. "Forecasting with Business and Consumer Survey Data," Forecasting, MDPI, vol. 3(1), pages 1-22, February.
    9. Stilianos Fountas & Dimitra Kontana & Paraskevi Tzika, 2024. "Uncertainty and financial asset return spillovers: Are they related? Empirical evidence from three continents," Discussion Paper Series 2024_03, Department of Economics, University of Macedonia, revised Mar 2024.
    10. Oscar Claveria, 2021. "Uncertainty indicators based on expectations of business and consumer surveys," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(2), pages 483-505, May.
    11. Oscar Claveria, 2021. "On the Aggregation of Survey-Based Economic Uncertainty Indicators Between Different Agents and Across Variables," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 17(1), pages 1-26, April.
    12. Petar Soric & Mateo Zokalj & Marija Logarusic, 2020. "Economic determinants of Croatian consumer confidence: real estate prices vs. macroeconomy," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 18(2B), pages 240-257.
    13. Oscar Claveria & Enric Monte & Salvador Torra, 2018. "“A geometric approach to proxy economic uncertainty by a metric of disagreement among qualitative expectations”," AQR Working Papers 201803, University of Barcelona, Regional Quantitative Analysis Group, revised Jun 2018.
    14. Ömer YALÇINKAYA & Ali Kemal ÇELİK, 2021. "The Impact of Global Uncertainties on Economic Growth: Evidence from the US Economy (1996: Q1-2018: Q4)," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 35-54, June.
    15. Maša Soric & Petar Soric & Oscar Claveria, 2023. "“Economic uncertainty and suicide mortality in postpandemic England”," AQR Working Papers 202310, University of Barcelona, Regional Quantitative Analysis Group, revised Dec 2023.
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    18. Gillmann, Niels & Kim, Alisa, 2021. "Quantification of Economic Uncertainty: a deep learning approach," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242421, Verein für Socialpolitik / German Economic Association.
    19. James E Payne & Saban Nazlioglu & Andrea Mervar, 2023. "Economic policy uncertainty and international tourist arrivals: A disaggregated analysis of the Croatian Adriatic coast," Tourism Economics, , vol. 29(4), pages 986-1004, June.
    20. OlaOluwa S. Yaya & Hammed A. Olayinka & Ahamuefula E. Ogbonna & Mamdouh Abdulaziz Saleh Al-Faryan & Xuan Vinh Vo, 2024. "Dynamic connectedness of economic policy uncertainty in G7 countries and the influence of the USA and UK on non-G7 countries," Economic Change and Restructuring, Springer, vol. 57(2), pages 1-27, April.

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    More about this item

    Keywords

    economic uncertainty; Economic Policy Uncertainty Index; VAR model with time-varying parameters;
    All these keywords.

    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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