Business Excellence, Vol. 6 No. 2, 2012.
Preliminary communication
CONNECTION OF TERMS OF TRADE, OPENNESS AND ECONOMIC GROWTH IN THE REPUBLIC OF CROATIA
Zoran Kovačević
orcid.org/0000-0002-6671-5901
; Faculty of Economics and Business, University of Zagreb, Zagreb, Croatia
Daniel Tomić
orcid.org/0000-0002-7309-6096
; Department of Economics and Tourism "Dr. Mijo Mirković", Juraj Dobrila University of Pula, Pula, Croatia
Abstract
Croatia is a small, open economy characterised by strong foreign trade imbalances and high international debt. In such circumstances, changes in any variable with an international signifi cance can result in changed macroeconomic stability of the Croatian economy. One of those variables is the so called “terms of trade”. Terms of trade – as the
relationship between export and import prices – is an extremely important measure for an economy, in so far as it reflects the quantity of exports needed to purchase a quantity of imports, which consequently reflects on the economic growth potential of the country. Furthermore, while improving the trend of terms of trade can have positive effects on the purchasing power and real income, their signifi cant fl uctuations can lead to macroeconomic instability. The goal of this paper is to analyse the connection between terms of trade, openness and economic growth in the Republic of Croatia. Special attention was dedicated to studying the eff ects of volatility of revenue terms of trade, i.e. the negative impact of their volatility on economic growth, at the same time disregarding the indirect influence of the openness of the economy in this connection.
Keywords
revenue terms of trade; fluctuations and volatility; openness of economy; economic growth; Croatia
Hrčak ID:
96824
URI
Publication date:
1.12.2012.
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