engleski

Fiscal, external and global determinants of Croatian government bond spreads

Deterioration in the fiscal positions, accompanied with turbulences in global financial markets, led to sharp increase in sovereign bond spreads of most emerging European countries in past few years. This paper aims to assess the main underlying factors of Croatian government bond spread variations, i.e. the impact of local macroeconomic conditions and the global market environment on the bond spread. Indicators of fiscal, external and overall market conditions are employed in VAR analysis. We found that shocks to the fiscal and current account balance are the main drivers of the variation in Croatian government bond spread, although the impact of global market volatility should not be undermined.

government bonds spread; fiscal and external vulnerabilities; global volatility; VAR

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