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Coherence of Business Cycles and Economic Shocks between Croatia and Euro Area Member States

Karlo Kotarac (), Davor Kunovac () and Rafael Ravnik ()
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Karlo Kotarac: The Croatian National Bank, Croatia
Davor Kunovac: The Croatian National Bank, Croatia

No 53, Working Papers from The Croatian National Bank, Croatia

Abstract: The paper analyses the coherence of business cycles and supply and demand shocks between Croatia and euro area core countries. The results obtained point to several basic conclusions. Firstly, the coherence of business cycles and the correlation of supply and demand shocks between Croatia and euro area core countries are relatively high. Secondly, symmetric (common) shocks are dominant for explaining the dynamics in domestic GDP, while the contributions of asymmetric shocks are significantly smaller. Thirdly, the results point to the convergence of supply and demand shocks and business cycles between Croatia and euro area core countries. Based on all of the above, we may conclude that the introduction of the euro and the related adoption of the common countercyclical monetary policy should not result in significant costs for the Croatian economy.

Keywords: cycle coherence; aggregate supply and demand shocks; symmetric and asymmetric shocks (search for similar items in EconPapers)
JEL-codes: F33 F44 E42 C32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-mac and nep-opm
Date: 2017-10
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