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Identifying Recession and Expansion Periods in Croatia

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  • Ivo Krznar

Abstract

In this paper business cycle turning points in Croatia are determined from early 1998 to the end of 2010. For the purpose of distinguishing the periods of recession from the periods of expansion in the Croatian economy three methods are used: simple analysis of quarterly GDP growth rates, the non-parametric Bry-Boschan algorithm and parametric Markov regime switching model. The results of the BryBoschan algorithm and the estimated Markov regime switching model clearly indicate that since 1998 the Croatian economy has undergone two recessions. The first recession ended in mid-1999. The second recession began in the third quarter of 2008 and has not yet ended, according to the data available for the end of 2010. In view of the short period of positive business activity growth in 2010, within the period of negative growth rates lasting from mid-2008, the simplest analysis of the quarterly growth rates on the basis of the “two consecutive negative (positive) GDP growth rates” cannot explain clearly the state of the business cycle in 2010. In the period between the two recessions, a long period of expansion in economic activity of almost nine years was recorded. The conclusions on the turning points separating the recession from the expansion periods are robust to the use of different methods of their determination. All the methods include quarterly GDP growth rate as a relevant measure of movements in the Croatian economy. However, the results of the estimated factor model, i.e. the estimated common component of the set of variables related to GDP, show that the determined turning points are not sensitive to the selection of the variable measuring economic activity.

Suggested Citation

  • Ivo Krznar, 2011. "Identifying Recession and Expansion Periods in Croatia," Working Papers 29, The Croatian National Bank, Croatia.
  • Handle: RePEc:hnb:wpaper:29
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    File URL: http://www.hnb.hr/repec/hnb/wpaper/pdf/w-029.pdf
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    References listed on IDEAS

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    1. Stock, James H. & Watson, Mark, 2011. "Dynamic Factor Models," Scholarly Articles 28469541, Harvard University Department of Economics.
    2. Ekaterini Tsouma, 2014. "Dating business cycle turning points: The Greek economy during 1970-2012 and the recent recession," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2014(1), pages 1-24.
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    Cited by:

    1. Daniel Tomiæ Saša Stjepanoviæ, 2017. "Forecasting Capacity of ARIMA Models; A Study on Croatian Industrial Production and its Sub-sectors," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 20(1), pages 81-99, May.
    2. 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.
    3. Baumann, Ursel & Gomez-Salvador, Ramon & Seitz, Franz, 2019. "Detecting turning points in global economic activity," Working Paper Series 2310, European Central Bank.
    4. Mile Bosnjak, 2017. "Structural Change In Croatian Real Gdp Growth Rates," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 26(1), pages 205-218, june.

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    More about this item

    Keywords

    recession; expansion; Bry-Boschan algorithm; Markov regime switching model; turning points; dynamic factor model;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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