Cointegration analysis and VECM of FDI, employment, export and GDP in Croatia (2002–2017) with particular reference to the global crisis and poor macroeconomic governance

Marinko Skare, Justyna Franc-Dabrowska () and Dajana Cvek ()
Additional contact information
Justyna Franc-Dabrowska: Warsaw University of Life Sciences – SGGW, Poland
Dajana Cvek: Technical High School, Pula, Croatia

Equilibrium. Quarterly Journal of Economics and Economic Policy, 2020, vol. 15, issue 4, 761-783

Abstract: Research background: The preconditions for attracting foreign investment are political stability and long-term capital investment, positively influencing the recipient country's development. During the crisis as well as in the unstable political environment, economic agents engage in speculative and risky acts for faster earnings. Purpose of the article: The paper aims to point out the importance of foreign direct investments (FDI) and other macroeconomic variables and their relationship with particular reference to the Croatian economy in 2002–2017. Methods: We use ADF test, development of the VECM model, testing of the stability of the VECM model, decomposition of the variance of the predictive errors of the variables, analysis of responses to unit orthogonal pulses. The vector correction auto-regression model (VECM) explores the long-term relationship between (FDI) and macroeconomic indicators in crisis time. Findings & Value-added: Applying the VECM model, we find that employment, export, and GDP variables are exogenous in the short term. The FDI variable is statistically significant and adjusts for the long-run equilibrium. Analyzing the responses to unit shocks, we conclude there is weak feedback of the observed variables and a weak effect of the observed variables in the Croatian economy. The FDI variable does not affect GDP, employment, and exports in Croatia due to poor macroeconomic management, corruption, regional development, inefficiency, and inefficient foreign direct investment structure.

Keywords: FDI; VECM model; macroeconomic variables; long-term equilibrium; crisis (search for similar items in EconPapers)
JEL-codes: E20 G00 O16 (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://dx.doi.org/10.24136/eq.2020.033 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pes:ierequ:v:15:y:2020:i:4:p:761-783

Access Statistics for this article

Equilibrium. Quarterly Journal of Economics and Economic Policy is currently edited by Adam P. Balcerzak

More articles in Equilibrium. Quarterly Journal of Economics and Economic Policy from Institute of Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Adam P. Balcerzak ( this e-mail address is bad, please contact ).