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Financial Conditions and Economic Activity

Author

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  • Mirna Dumičić

    (The Croatian National Bank, Croatia)

  • Ivo Krznar

Abstract

The main aim of this paper is to analyse the interrelation between domestic and external financial conditions and economic activity. For this purpose, an overall Financial Conditions Index (FCI) for Croatia was constructed, together with two subcomponents – domestic and foreign – used to estimate a VAR model of interdependence between financing conditions and real economic activity in Croatia and in the eurozone. The results of the estimated model indicate that financing conditions in Croatia are primarily determined by domestic GDP and external financial conditions, while a variance decomposition estimate, with these two variables, also points to foreign GDP as an important determinant of the variability of domestic economic and financial activity indicators.

Suggested Citation

  • Mirna Dumičić & Ivo Krznar, 2013. "Financial Conditions and Economic Activity," Working Papers 37, The Croatian National Bank, Croatia.
    • Handle: RePEc:hnb:wpaper:37
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Zabavnik, Darja & Verbič, Miroslav, 2021. "Relationship between the financial and the real economy: A bibliometric analysis," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 55-75.
    3. Manamani SAHOO, 2017. "Financial conditions index (FCI), inflation and growth: Some evidence," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(612), A), pages 147-172, Autumn.

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    More about this item

    Keywords

    financial conditions index; GDP; Croatia; eurozone; principal component analysis; VAR model;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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