Public Sector Economics

The euro and inflation in Croatia: much ado about nothing?

Petar Sorić — 2024-03-01

This paper aims to shed some light on the issue of euro-induced inflation in the case of the Croatian euro changeover. Applying the synthetic control method, we were unable to find unambiguous and robust evidence of such an impact on the aggregate level. Focusing on a wide array of products and services, we found no impact of the euro on most price subcategories except those related to food, clothes and restaurant prices. The findings for the latter two categories seem particularly robust, surviving a battery of alternative specifications such as the generalized synthetic control and matrix completion method. Placebo tests reveal considerable ambiguity vis-à-vis the exact timing of the euro effect on prices, probably reflecting the fact that Croatia had been a highly euroized economy years before the de iure changeover.

Forecasting medical inflation in the European Union using the ARIMA model

Enja Erker — 2024-03-01

As healthcare costs continue to pose significant challenges for governments and policymakers, accurate forecasting of medical inflation has become crucial in the European Union. This study aims to provide insights into the trajectory of medical inflation within the EU using the Autoregressive Integrated Moving Average (ARIMA) model and to check whether this model is an effective tool for predictions of medical inflation. The findings of the study have significant implications across various sectors. With accurate forecasts of medical inflation, policymakers can proactively address challenges, insurers can determine appropriate premiums and develop innovative models, and healthcare entities can allocate resources strategically to ensure financial stability and quality care.

Potential investments of pension funds in long-term care for the elderly: the case of Croatia

Ljubica Mežnarić — 2024-03-01

Contributions to pension funds are placed on the capital market. To invest in a better old age for those who set aside those funds, it is necessary to adjust the system. The paper analyzes the problem in the long-term care system faced by private care homes, the outlook for the building of additional homes, and the interest of pension funds in investing in the long-term care system. The problem is becoming more and more significant as the population is growing older. The authors interviewed sixteen respondents. The aim was to collect views on the current possibilities and perspectives for the development of the long-term care system in Croatia. The results indicate that pension funds do have an interest in investing, but before that, the system of homes for the elderly needs to be reorganized.

Does governance contribute to the public spending – CO2 emissions nexus in developing economies? Policy lessons for sustainable development

Van Bon Nguyen — 2024-03-01

Global climate change due to increasing CO2 emissions threatens the development and survival of many countries, especially those on the coast. Intentional government spending by sectors can lower CO2 emissions to help these countries in sustainable development. Meanwhile, governance has some importance in enabling governments to achieve their economic development goals. Does governance affect the public spending – CO2 emissions nexus in developing economies? The paper seeks answers by employing the system GMM Arellano-Bond estimators to assess the impact of public spending, governance/institutional quality, and their interaction on CO2 emissions for a sample of 109 developing economies between 2002 and 2021. The results seem counter-intuitive that public spending reduces and governance increases CO2 emissions, while their interaction lowers them. Furthermore, private investment and economic growth promote CO2 emissions, while trade openness decreases them. The findings in this paper provide some policy lessons for governments of developing economies to protect environment.

Is external debt an impediment to the South African economy?

Sanele Stungwa — 2024-03-01

The purpose of this study is to test whether the relationship between external debt and economic growth is symmetric or asymmetric in South Africa using annual time series data from 1985 to 2021. The study employed NARDL bounds and Breitung nonparametric cointegration estimation methods. Breitung, Bierens nonparametric, and ZA unit root test are used to check for the order of integration of the variables. The results from NARDL bounds and Breitung nonparametric cointegration test confirm a long run relationship between the variables. The results indicate that the responsiveness of GDP to positive shocks of external debt is less than that to negative shocks. An increase in external debt is associated with a decrease in GDP, while a decrease in external debt is associated with an increase in GDP. The study suggests that South African economy should keep its external debt sustainable so as not to harm economic growth.