engleski

Export and Domestic Demand: Some Empirical Evidence in Croatia

Over the past years, since the euro was launched in 1999, export performance was heterogeneous across EU country members. While some countries experienced annual growth of exports, others have shown exact the opposite or stagnation. In a globalizing economy, maintaining and boosting external competitiveness represents a major concern to countries and their economic policy makers. This especially refers to small economies which are part of unique European market. Croatia, along with other countries in periphery of Europe, suffers from persistent current account and trade deficits. The sudden stop of private capital inflows with the 2008 global financial crisis revealed Croatia’s weak competitiveness. High borrowing rate and investments, including significant FDI before the crisis, did not improve export performance. Moreover, Croatia has been losing export market shares since 2004 and there was has been a particular intensification in these losses since 2008. Croatian export is also threatened by the economic slowdown in its main trade partners which are in biggest percentage EU countries.n The sustainability of Croatia's external position is conditioned on improved competitiveness and ability to export. Determining the factors which influence Croatian export has an important role in making the way out from current crises. Theoretical analysis suggests that price competitiveness factors along with foreign demand can explain well enough the external competitiveness of one country. It is we ll known that countries with a fixed or hard peg exchange rate regime can improve price ompetitiveness through internal devaluation. This adjustment can be long and painful with a diffic ult political implementation. It raises a question if there are other factors, besides traditional one, which can influence export performance. In this paper we investigate empirically in what extent domestic demand can explain Croatian export performance over the period from 1999 to 2013.

export performance; do mestic demand; error correction model

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