engleski

Sources of Exchange Rate Fluctuations: Empirical Evidence from Croatia

This paper investigates the sources of real exchange rate fluctuations in Croatia, distinguishing between real and nominal sources, for the sample period ranging from January 1998 to March 2011. The results obtained using structural vector autoregression (SVAR) model indicate that the volatility of the Croatian real exchange rate is mainly influenced by the demand shocks, both in the short run and in the long run. On the other hand, the impact of the supply shocks proved to be insignificant. Therefore, the exchange rate seems to be a shock absorber in Croatian economic fluctuations.

SVAR; Blanchard-Quah decomposition; impulse response function; macroeconomic shocks

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