Economic Growth in Croatia: Potential and Constraints

Abstract

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper examines the factors and constraints that affect recent and potential growth in Croatia, as well as policies that can influence it. On current productivity trends, it estimates Croatia's potential growth rate at 4-4½ percent, a result reasonably robust to different methodologies. To sustain growth at a higher rate in line with the authorities' aspirations, the analysis highlights the critical need to improve the business environment through further measures to reduce the administrative burden, legal uncertainties, and corruption. It also emphasizes the importance of attracting more greenfield foreign direct investment, and reforms to reduce the role of the state in the economy through fiscal consolidation and faster privatization. JEL Classification Numbers: E60, O11

An Empirical Analysis of the Determinants of Economic Growth in the Western Balkans

“…Besides these findings, the IMF report (Murgasova et al, 2015) also stated that the non performing loans (NPLs) in Western Balkan countries became quite slow because of domestic factors such as legal, judicial, tax, and regulatory obstacles. Moore and Vamvakidis (2007) used The Hodrick-Prescott (HP) filter: Cobb-Douglas function of production with two-factors, capital and labor, and simulation of a growth empirical model for Croatia. The coefficients were used to derive Croatia's potential output growth.…”

Impact of the transition on the total factor productivity in Croatia

“…Iradian (2007) and Moore and Vamvakidis (2007) estimated dominant role for the physical capital, while Burda and Severgnini (2009) find TFP as the most dominant growth factor. When it comes to the labor contribution to growth rate, all studies indicate that share of raw labor is much smaller compared to other factors and sometimes even negative.…”

“…(Ahmed and Ghani, 2007) Alternatively, when there is enough reliable data, so called growth regressions are also very popular (e.g. Benhabib and Spiegel, 1992;Iradian, 2007;Moore and Vamvakidis, 2007). However, in the case of transition countries the main disadvantage of growth regressions is the fact that it is often difficult to construct a production function with stable parameters due to peculiar developments of factors of production and the lack of sufficiently long and reliable data series.…”

“…Iradian, 2007;Burda and Severgnini, 2014), physical capital shares (e.g. Iradian, 2007;Chessa and Schouwstra, 2005), assumed service lives of fixed assets (Wong and Seng, 1997), data sources (Moore and Vamvakidis, 2007), human capital measures (Ding and Knight, 2009;de Vries et al, 2012), geometric versus linear perpetual inventory method (Ganev, 2005b), primal versus dual growth accounting approach (Islam and Dai, 2009), etc.…”

Corporate Social Responsibility and Consumer Ethics From the Perspective of Young Consumers in Croatia

“…Human health and environment protection are growing in importance and that various market subjects are finding ways how to implement policies and practices of their protection starting from United Nation Conference on Environment and Development held in 1992. in Rio de Janerio (see Moore, Vamvakidis 2007). Awareness of public on health and environment issues grows over time and, therefore, companies have to implement environmental policies into their business strategies in order to preserve and enforce a positive public image.…”