Public Sector Economics, Vol. 41 No. 4, 2017.
Original scientific paper
https://doi.org/10.3326/pse.41.4.3
Economic uncertainty and its impact on the Croatian economy
Petar Sorić
orcid.org/0000-0002-6773-264X
; University of Zagreb, Faculty of Economics and Business Zagreb, Zagreb, Croatia
Ivana Lolić
orcid.org/0000-0003-3112-7699
; University of Zagreb, Faculty of Economics and Business Zagreb, Zagreb, Croatia
Abstract
The aim of this paper is to quantify institutional (political and fiscal) and non-institutional uncertainty (economic policy uncertainty, Economists’ recession index, natural disasters-related uncertainty, and several disagreement measures). The stated indicators are based on articles from highly popular Croatian news portals, the repository of law amendments (Narodne novine), and Business and Consumer Surveys. We also introduce a composite uncertainty indicator, obtained by the principal components method. The analysis of a structural VAR model of the Croatian economy (both with fixed and time-varying parameters) has showed that a vast part of the analysed indicators are significant predictors of economic activity. It is demonstrated that their impact on industrial production is the strongest in the onset of a crisis. On the other hand, the influence of fiscal uncertainty exhibits just the opposite tendencies. It strengthens with the intensification of economic activity, which partially exculpates the possible utilization of fiscal expansion as a counter-crisis tool.
Keywords
economic uncertainty; Economic Policy Uncertainty Index; VAR model with time-varying parameters
Hrčak ID:
190404
URI
Publication date:
12.12.2017.
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