engleski

Has the Accession of Croatia to the EU Affected Business Sentiment in Industry? Synthetic Control Method Approach

Some economic and political events determine the level and dynamics of real economic variables on one hand, and business sentiment as a “soft” variable with a good predictive power for those variables, on the other. In this paper, we observe the impact Croatia’s accession to the European Union (EU) in 2013 had on the Industrial confidence indicator (ICI) as a measure of business sentiment in Croatia’s industry. Entering the EU had a strong positive impact on economies of countries that entered the Union. Unlike other new EU member states, which have entered the EU in the upward phase of the European business cycle, Croatia entered this community immediately after the stabilization of the European debt crisis and in a long recession. Using a novel application of the Synthetic Control Method (SCM) to the business survey (BS) data, the main hypothesis, that Croatia’s entrance to the EU had a strong positive impact on the ICI (which can be explained as euphoria), is confirmed. Conclusions derived from this research are a contribution to the improvement and popularization of BS and SCM.

industrial confidence indicator ; synthetic control method ; business and consumer survey ; counterfactual methodology

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