engleski

Integration of Aggregate Economic Activity between the Euro Area and Croatia: Empirical Analysis

Cumulative impulse ratio indicates that the short term effect of a shock is over 100% higher than in the Euro area which means that Croatia is very sensitive to Euro area shock. The positive sign implies that the short-term effects are in the same direction. The result is likely due to the lower persistence of cycles in Croatia which would have led to higher cyclical volatility and sensitivity to foreign shocks. The high level of synchronisation of Croatian industrial production is not surprising, since industry generates a large proportion of foreign trade, which is one of the main channels through which synchronization can occur.

business cycle; VAR model; correlation

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