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

• Authors: Marinko Škare , Justyna Franc-Dąbrowska , Dajana Cvek

Abstracts

EN

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

EN

FDI; VECM model; macroeconomic variables; long-term equilibrium; crisis

• Publisher: Instytut Badań Gospodarczych
• Journal: Equilibrium. Quarterly Journal of Economics and Economic Policy
• Year: 2020
• Volume: 15
• Issue: 4
• Pages: 761-783

Dates

published

2020

Contributors

author

Marinko Škare

• Juraj Dobrila University of Pula

• https://orcid.org/0000000164263692

author

Justyna Franc-Dąbrowska

• Warsaw University of Life Sciences – SGGW

• https://orcid.org/0000000258810343

author

Dajana Cvek

• Technical High School in Paula

• https://orcid.org/000000027207440X

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Identifiers

DOI

10.24136/eq.2020.033

Biblioteka Nauki

22444360