engleski

World Crisis and Small Open Economies – Can Policy Modeling Help?

Small open economies, especially economies in transition such as Croatian are vulnerable to external economic shocks. To deal with the crisis governments are trying hard to set up a policy modeling or better say crisis macroeconomic management framework. The aim of the paper is to reassess the policy models countries used to fight the actual global economic crisis with special attention to the policy models developed in small open economies. Croatian experience in designing a crisis macroeconomic management policy will be presented, particularly positive results of implemented macroeconomic policy mix but also faults, set backs in the implemented policies and strategies will be examined. Particular attention of the research will be devoted to the role of general equilibrium models in small open economies to cope with the crisis. Practical but also theoretical experience in using GEM for small open economies based on the evidence from Croatia will be presented. Another aspect of the research that will be addressed is to evaluate if GEM can be used in forecasting country's macroeconomic performance in the future. The results of the forecasting Croatian macroeconomic performance for a five-year window based on the analysis from the GEM model developed for Croatia should give valuable insight to policy makers and managers in the search for the right policy model.

policy modeling; general equilibrium model; world crisis.

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