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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

    as
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    2. Jing Cynthia Wu & Fan Dora Xia, 2016. "Measuring the Macroeconomic Impact of Monetary Policy at the Zero Lower Bound," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(2-3), pages 253-291, March.
    3. 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.
    4. Ivo Krznar & Davor Kunovac, 2010. "Impact of External Shocks on Domestic Inflation and GDP," Working Papers 26, The Croatian National Bank, Croatia.
    5. Igor Velickovski, 2013. "Assessing independent monetary policy in small, open and euroized countries: evidence from Western Balkan," Empirical Economics, Springer, vol. 45(1), pages 137-156, August.
    6. Warren Torgerson, 1952. "Multidimensional scaling: I. Theory and method," Psychometrika, Springer;The Psychometric Society, vol. 17(4), pages 401-419, December.
    7. Mark Mink & Jan P.A.M. Jacobs & Jakob de Haan, 2012. "Measuring coherence of output gaps with an application to the euro area," Oxford Economic Papers, Oxford University Press, vol. 64(2), pages 217-236, April.
    8. Velimir Šonje & Igeta Vrbanc, 2000. "Measuring the Similarities of Economic Developments in Central Europe: A Correlation between the Business Cycles of Germany, Hungary, the Czech Republic and Croatia," Working Papers 3, The Croatian National Bank, Croatia.
    Full references (including those not matched with items on IDEAS)

    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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