Naslov
The Analysis of the Impact of Depreciation on External Debt in Long Run: Evidence From Croatia

Autori
Palić, Irena ; Banić, Frane ; Matić ; Laura

Izvornik
Interdisciplinary description of complex systems (1334-4684) 16 (2018), 1; 186-193

Vrsta, podvrsta i kategorija rada
Radovi u časopisima, članak, znanstveni

Ključne riječi
exchange rate depreciation, external debt, cointegration analysis, error correction model, long-run equation

Sažetak
The impact of exchange rate changes in small open economies has been a widely researched topic for decades. According to economic theory and relevant research, depreciation can have a positive impact on the economy through an increase in exports, and a negative effect through decrease in an individual consumption. The aim of this article is to assess the impact of exchange rate depreciation on external debt in Croatia in the long-run. The long-run impact of depreciation on external debt in Croatia is assessed using Johansen cointegration approach. The results point to the existence of one cointegration relation. The long-run impact of exchange rate depreciation on external debt in Croatia is statistically significant and positive, what is in line with previous research and economic theory. The conducted analysis outlines the possible negative impact of depreciation on Croatian economy through the increase of external indebtedness, what could consequently decrease the wealth of all sectors indebted in foreign currency. Since Croatia is a highly euroised small open economy with high external indebtedness in foreign currency, this research provides captivating results for monetary and fiscal policy-making in Croatia. Therefore, as a result of the conducted empirical analysis, the exchange rate depreciation in Croatia is not recommended as the instrument of increasing export competitiveness due to current high external indebtedness in foreign currency.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA