Review article
THE DEMAND FUNCTION FOR MERCHANDISE EXPORTS: THE CASE OF CROATIA
Mile Bošnjak
orcid.org/0000-0002-7663-198X
; University of Zagreb Faculty of Economics and Business Department of International Economics
Ivan Novak
orcid.org/0000-0003-1473-7049
; University of Zagreb Faculty of Economics and Business Department of International Economics
Maja Bašić
orcid.org/0000-0002-1842-7091
; University of Zagreb Faculty of Economics and Business Department of International Economics
Abstract
The paper aims to examine demand for merchandise exports from Croatia as a function of relative prices and income of the European Union (EU) member countries. Data sample consists of quarterly time series data over the period 2000 q1 -2019 q1. The paper employed standard tests of cointegration and state space model with time-varying parameters approach to examine the relationship between merchandise exports and its assumed determinants. The results revealed demand function for Croatian merchandise exports highly elastic to changes in income and relative prices. Furthermore, there was sizable increase in demand for merchandise exports from Croatia as a consequence of joining EU. Eventually, the results were discussed in context of balance of payments constraints to growth theory and policy implications were derived.
Keywords
Exports demand; income; relative prices; Kalman filter; Croatia
Hrčak ID:
239589
URI
Publication date:
23.6.2020.
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