THE DEMAND FUNCTION FOR MERCHANDISE EXPORTS: THE CASE OF CROATIA

Mile Bošnjak, Ivan Novak () and Maja Bašić
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Ivan Novak: University of Zagreb

Economic Thought and Practice, 2020, vol. 29, issue 1, 123-135

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 (search for similar items in EconPapers)
JEL-codes: C13 C51 F14 F17 (search for similar items in EconPapers)
Date: 2020
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