Financialization of the state in Croatia: a preliminary analysis (original) (raw)

Financial Liberalization in Croatia

Ekonomska Misao i Praksa, 2006

The change of the international capital flow structure, where the emphasis shifted from official lending to increased private capital flows, presented the transition economies with new challenges in the development of their financial systems. Starting with the comparative perspective of other transition economies, in this paper we focus on the effects that international private capital flows had on the Croatian banking sector as well as on how they helped shape its stock market. We analyze foreign direct investment and portfolio investment, two main components of international private capital flows, and we conclude with some insights and dilemmas regarding the desirable degree of openness of the capital accounts with regard to the relation between the economic growth and the long-term stability.

Croatia: Macroeconomic and Structural Challenges

1. Croatia's economic and social achievements before the 2008 global crisis, when contrasted with those of uppe r middle-income countries, look remarkable. High and sustained rates of economic growth combined with a decline in the size of population caused a consistent increase in per capita income in the 1994-2008 period. As a result, per capita income converged with the richest economies. More broadly, Croa tia improved substantially its macroeconomic framework; kept the social indicators among the highest in Eastern Europe; and was concluding its processes of accession to the EU and NATO. 2. Yet, the 2008 global economic crisis, with the loss of credit, expose d Croatia's macroeconomic vulnerabilities. The stimulus for a significant share of Croatia's pre-crisis growth has been withdrawn resulting in six consecutive years in recession through 2014. Prior to the crisis, large, relatively cheap capital inflows circulated into the economy, creating credit, consumption, a...

An Overview of Economic Crisis in Croatia: Causes and Its Consequences

Insights into Economics and Management, Vol. 11, 2021

This study highlights the effects of transformation of the inherited political system, with the reference to the way political parties and state institutions function as well as determine the negative impact of the transformation of the political system into the area of economy. In evaluating the causes of the crisis, those characteristics unique to Croatia must be seen in comparison to the majority of other post-communist countries. This is mainly related to the peculiarities of an inherited socialist system, and the circumstances in which the process of political and economic transformation of the Croatian society was begunThe process of multiple transformation of the socio-political system based on a peculiar paradigm of self-management of social ownership was carried out as the newly constituted state struggled to retain its independence and territorial integrity. According to the author, these factors are the key to understanding Croatia's current economic and social crisis, which is caused by the current value system. This system, built in the early 1990s, is a direct result of the war and a poorly managed transition. The applied value structure caused a gradual disintegration of civilization and became an impediment to further democratisation. Instead of advancing democracy toward the rule of law and justice, a "distorted" set of principles opened the way for the emergence of institutional corruption. According to the author, the inconsistencies that occurred during the period of political transition from a one-party regime to a democracy founded on democratic pluralism and the rule of law are the root of the issue. During the last decade of the twentieth century, the outcome of this democratic transition was the establishment of a political structure dominated by the dominance of one powerful political party and a weak opposition. Another issue raised by the author is the organisational model of the majority of newly formed political parties, which is characterised by a rigid hierarchical structure, with a powerful leader in charge of a small elitist circle of people who developed this political programme. It is concluded that implemented political transformation of the society was politocracy-an established model of the rule of political parties that functions in today's conditions. Also,the phase of economic transformation has allowed the rise of plutocracy, which has paved the way for the practise of ruling in favour of the citizen, to the detriment of the common good, in near collaboration with politocracy. According to the author, the most important necessity for Croatia to emerge from its economic crisis is a shift in its system of values,, and the prerequisite for this is the implementation of structural reforms in all fields of society-above all, the reform of the political system.

Banking and Financial Matters on Croatia's Road to the European Union

The ability of a country to meet the criteria for financial conver- gence on the EU depends on four key factors: the behaviour and struc- ture of the banks and non-banking financial service providers, the degree of development of the money and capital markets, the regulato- ry environment and the openness of the country to international finan- cial currents. In this work the factors that work in favour of a rapid accession by Croatia to the EU and those that are the key areas of vul- nerability on the same road are identified. The first group of factors includes the developmental level of the banking system, whose struc- tural characteristics (competitiveness, ownership structure and scope of financial mediation) work in favour of rapid integration. This group also includes the standardising regulatory framework, the changes in which over the last few years have brought Croatia very close to the standards of the EU. Non-banking financial service providers are rela- tively undevelope...

Financial Integration and Financial Crisis: Croatia Approaching The EMU

2009

The breakdown of command economies has significantly increased growth potentials all over Europe and opened up prospects for economic development. Encouraged by that, the EU embarked on the process of deeper economic integration. Its main aspects – economic liberalization and monetary integration – coincided with the worldwide globalization of trade and capital flows. As a laggard country in the process

Croatia: Public Finance Review, Restructuring Spending for Stability and Growth, Macroeconomics and Fiscal Management Global Practice, World Bank, 2014

On July 1, 2013, Croatia became the 28th member of the European Union. This achievement crowned more than a decade of macroeconomic and institutional reforms by the Croatian authorities and other stakeholders that yielded important development results. Croatia's institutions are now stronger than a decade ago, reflecting broad and deep institutional adjustment that underpinned the pre-accession process and Croatia has become a high-income country within a decade. Yet the global economic crisis exposed Croatia's macroeconomic vulnerabilities. The report analyzes three inter-related issues needed to strengthen macroeconomic stability, and lay the foundation for a robust recovery. First, it analyzes major fiscal weaknesses, risks and alternative fiscal scenarios. Second, it analyzes institutional weaknesses and requirements for the efficient use of EU funds. And third, it analyzes the structure of Croatia's public finances and provides policy options for short term expendit...

Monetary and financial policies for "de-euroization" -a case study of recent Croatian experience

We analyze the impact of monetary and financial policies on the level of financial euroization in Croatia during 2002-2010. We find strong empirical evidence that these policies had effectively helped reduce financial euroization in 2002-2007. Moreover, after the global crisis spilled over, some of them might have contributed to partial re-euroization in 2008-2009, although they ultimately paid off when judged against a wider set of criteria. Generalizing our results, it appears that in non-crisis periods monetary and financial policies are safe and effective in reducing financial euroization.

The Impact of Financial Crisis and Policy Response in Croatia

2009

We conducted the simulation of the impact of nancial crisis on the Croatian economy using the newly developed DSGE model for Croatia. The impact of the crisis is modeled by proxing it with two distinct shocks: an increase in foreign interest rate (cost of foreign borrowing) and a drop in export demand. Furthermore, we introduce monetary policy response in the form of regulatory requirement reduction. The results to a large extent match the actual data con rming an early impact of the crisis. More precisely, the nancial crisis led to a signi cant slowdown in real activity, international trade and nancial aggregates. The real activity is in decline, despite signi cant monetary policy response. With monetary policy regime based on a stable exchange rate, the central bank is limited in its attempt to counter the impact of the foreign shocks and signi cantly stimulate the real activity by simply adjusting the regulatory framework. By decreasing the regulatory burden and thereby increa...