engleski

Spillover effects between monetization, financial development and public debt in relation with unemployment in Croatia

The impact of monetization of economy as well as of financial development and the stability of the financial sector on economic growth have been subject of numerous studies. Most of the contemporary research carried out on this topic has shown the existence of strong nonlinear relationships between the mentioned factors. Using empirical data this study aims to analyse the impact of monetary and fiscal policy, as the two key leverages of economic policy, on unemployment. As in previous studies, based on statistical methods, but also by the use of self-organizing neural networks, the correlation and non-linearity of these relations has been proven. Research findings suggest that the annual growth rate of money supply is in positive correlation with the unemployment rate, while the indicators of the development of the financial sector and the annual growth rate of credit to the private sector are negatively correlated with the unemployment rate in the Republic of Croatia. The share of general government debt in GDP is positively correlated with unemployment, but the annual growth rate of general government debt is negatively correlated with unemployment. It is also possible to notice the spillover effects between M1 variables on Gross debt and M1 / GDP on Loans / GDP and Loans / GDP on Gross debt / GDP. The paper presents conclusions on the correlation and spillover effects between observed independent variables and proposes a methodology for modelling the nonlinearity of such relations.

Financial Development, GDP, Monetization, Public Debt, Unemployment

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