Interdependence of Industrial Production Index and capital market in Croatia: VAR model

Bojan Tomić and Andrijana Sesar ()

MPRA Paper from University Library of Munich, Germany

Abstract: Industrial production is an important indicator of future trends in each of the economy including the Croatian economy. On the other hand, as a preceding factor of the economy dynamics changes, the equity indices of the capital market can be used. Due to different considerations and interpretations of their mutual initial causation, the paper analyzes the interdependence between the main index Croatian capital market CROBEX and indicators of total industrial production of the Republic of Croatian. Also, in the model was introduced exchange parity euro/kuna as an additional variable rate which is considered to have a significant influence on the competitiveness of the Croatian economy, as well as the capital market. The theoretical premise about the interaction of the foreign exchange rate and capital markets has been considered in the context of the "flow-oriented" and "stock-oriented" model. Aiming to determine the interdependence between aforementioned variables, the analysis was carried out using the vector autoregression model (VAR). The Granger causality test was conducted as part of the VAR model, as well as the decomposition of variance in future periods and the impulse response function of relevant variables. The results of analysis indicate the existence of causality of the exchange rate to the index of industrial production, as well as the existence of causality of the index of industrial production to CROBEX index.

Keywords: VAR model; causality; industrial production; CROBEX; the exchange rate. (search for similar items in EconPapers)
JEL-codes: C32 E44 G17 (search for similar items in EconPapers)
Date: 2015-04-29
New Economics Papers: this item is included in nep-mac and nep-tra
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Citations: View citations in EconPapers (1)

Published in Journal of Accounting and Management 1.V(2015): pp. 17-32

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:66816

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