Financial Conditions and Economic Activity

Mirna Dumicic Jemric and Ivo Krznar

No 37, Working Papers from The Croatian National Bank, Croatia

Abstract: The main aim of this paper is to analyse the interrelation between domestic and external financial conditions and economic activity. For this purpose, an overall Financial Conditions Index (FCI) for Croatia was constructed, together with two subcomponents – domestic and foreign – used to estimate a VAR model of interdependence between financing conditions and real economic activity in Croatia and in the eurozone. The results of the estimated model indicate that financing conditions in Croatia are primarily determined by domestic GDP and external financial conditions, while a variance decomposition estimate, with these two variables, also points to foreign GDP as an important determinant of the variability of domestic economic and financial activity indicators.

Keywords: financial conditions index; GDP; Croatia; eurozone; principal component analysis; VAR model (search for similar items in EconPapers)
JEL-codes: E44 E50 E58 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2013-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:hnb:wpaper:37

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