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Impact of Macroeconomic Shocks on Real Output Fluctuations in Croatia

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  • Nataša Erjavec Boris Cota Saša Jakšić

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

Abstract

The paper investigates the sources of real output variability in Croatia by assessing the impact of macroeconomic structural shocks on fl uctuations in real output. The analysis is based on a structural vector autoregressive model (SVAR) where structural shocks (demand, supply and nominal) are identifi ed using Blanchard-Quah long run restriction technique. The fi ndings of the empirical analysis point out the dominant role of supply shocks in explaining real output fl uctuations. In the same time the results reveal negligible effects of nominal and demand shocks on the variability of real output. To get a better insight in the dynamics of real output in the aftermath of the structural shocks we also analyse the impulse response functions. The results show that a positive supply shock leads to a permanent increase in real output. A nominal shock decreases the real output marginally although the effect is only temporary and fades out quickly. Surprisingly, the effect of a demand shock is insignifi cant both in the short run and in the long run.

Suggested Citation

  • Nataša Erjavec Boris Cota Saša Jakšić, 2012. "Impact of Macroeconomic Shocks on Real Output Fluctuations in Croatia," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 15(Special C), pages 69-78, December.
    • Handle: RePEc:zag:zirebs:v:13:y:2010:i:sci:p:69-78
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    More about this item

    Keywords

    real output; structural vector autoregression; variance decomposition; impulse response function; macroeconomic shocks;
    All these keywords.

    JEL classification:

    • 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
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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