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2022 | Buch

Real and Financial Sectors in Post-Pandemic Central and Eastern Europe

The Impact of Economic, Monetary, and Fiscal Policy

herausgegeben von: Prof. Bojana Olgić Draženović, Prof. Vesna Buterin, Prof. Stella Suljić Nikolaj

Verlag: Springer International Publishing

Buchreihe: Contributions to Economics


Über dieses Buch

This book offers new insights into the real and financial sectors in the post-pandemic European Union, with a specific focus on the countries of Central and Eastern Europe and a special reference to Croatia. The contributors examine the timeliness, justification, and appropriateness of the measures taken in response to the deteriorating economic conditions and the associated outcomes. They further discuss various aspects of economic, financial, and energy policy. While doing so, they focus on two important issues. The first is an analysis and assessment of the financial development and performance of the real sector. The second is an insight into the institutional dimensions of the COVID-19 pandemic, including the discussion of obstacles and opportunities for recovery in the near future.
The topics covered in this book include, but are not limited to, unconventional monetary policy, financial cycles, fiscal incentives, institutional development and institutional quality, the banking system, real estate markets, competitiveness, pension systems, financial regulation, energy markets, environmental, social, and governance (ESG) factors, as well as agricultural policy. Therefore, this volume will appeal to researchers, students, and scholars of finance and economics, as well as policy-makers interested in a better understanding of real and financial sectors, economic policy, and post-pandemic economic development in Central and Eastern Europe.


From Pandemics to the Unconventional: Monetary Policy in EMs: The Case of Croatia
The emergence of the pandemic has once again highlighted the possibilities of unconventional monetary policy and enabled the expansion of monetary policy instruments in emerging and developing economies. For most of these European countries, the interest rate channel of monetary policy may not be very strong; they are used to balance sheet policies. The balance sheet of the Croatian National Bank (CNB) has also increased in lockstep with the balance sheet of the European Central Bank over the past decade, as have the excess reserves of the banking system. Although the fuel for these increases has been the accumulation of international reserves rather than the purchase of domestic securities, the banking liquidity channel has operated in the same manner. Since the COVID -19 crisis, the CNB has acted within the framework of various measures taken by the government as well as other regulatory institutions. At the same time, the CNB intervened heavily in the foreign exchange market and used a number of monetary policy operations to support kuna liquidity. In addition to standard structural and regular operations and the reduction of the reserve requirements, the CNB initiated for the first time a program to purchase government securities through the secondary market. The CNB used all conventional and unconventional instruments available to central banks in emerging markets, adapted them to specific domestic circumstances and successfully fulfilled its mandate.
Boris Vujčić
Financial Cycle Convergence: Evidence on Financial Cycles Synchronisation in the European Union and the European Economic and Monetary Union
Financial cycles are an established phenomenon in economics. An increasing collection of studies captures and quantifies financial cycles, their average duration and amplitude. Here we examine the national dimension of financial cycles in the euro area and their relationship to real GDP cycles. We use data on bank lending to businesses and households, as well as house prices in the European Union (EU) and the European Monetary Union (EMU) over a sample period of about 20 years. Financial cycles behaviour is more synchronised and convergent in the (EMU) area compared to the dynamics the authors reveal in the (EU) area. Germany and Luxembourg show a divergent financial cycles path and have a different relative transition path than the other clubs. In summary, we find empirical evidence that financial cycles dynamics vary across the (EU) Member States. The dynamics depend on the national debt level and monetary sovereignty position. There is no evidence of one distinct financial cycle convergence on the (EU) level. Moreover, we find evidence on two distinct convergence clubs with country members listed above. The identified convergence clubs show two distinct financial cycles patterns, one clearly more homogeneous for countries in club 1. The second one, in convergence club 2, is far more heterogeneous and divergent from one in Club 1. Also, the financial cycle dynamic in Club 2 is far more heterogeneous than the one we evidence for country members in Club 1.
Marinko Škare, Malgorzata Porada Rochon
Fiscal Response to the COVID-19 Shock in Croatia
In this paper, we analyse the effects of the COVID-19 shock on fiscal developments in Croatia. In the first part of the paper, we analyse the effects of adverse economic developments and discretionary policy measures on different (structural) fiscal indicators. In addition, we evaluate the evolution of fiscal space in Croatia before and during the COVID-19 crisis. In the second part of the paper, we analyse the policy response to this exogenous shock by fiscal policy makers and compare the size and structure of instruments used with other EU countries. Our analysis shows that fiscal policy makers in Croatia relied primarily on the so-called direct “above-the-line” fiscal measures and that fiscal response in Croatia was powerful in local terms but relatively modest compared to other EU countries.
Frane Banić, Milan Deskar-Škrbić, Hrvoje Šimović
The Impact of Financial Integration on Sectoral Polarization between Croatia and Eurozone Countries
The purpose of this paper is to analyse the impact of financial integration, as measured by bilateral FDI, on sectoral structures in Croatia and eurozone countries. The research objective is to determine whether there is a “bad” specialisation, i.e., a separation of sectoral structures that increases the costs of monetary integration of Croatia. The “bad” specialisation is the result of the inefficient allocation of productive resources to sectors with lower productivity. The research results show that financial integration promotes Croatia’s specialisation and makes the country more vulnerable to the occurrence of idiosyncratic shocks, which increases the costs of Croatia’s monetary integration. Moreover, the process of structural divergence shifts the specialisation of the Croatian economy to non-tradable sectors, making real convergence with more developed euro area countries more difficult. The impact of financial integration on the sectoral structures of Croatia and eurozone countries in the period 2001–2019 is analysed using a panel model. The panel results show that the impact is stronger if we exclude the crisis years. This suggests a stronger polarisation of sectoral structures between Croatia and eurozone countries during periods of larger FDI inflows to Croatia.
Mario Pečarić, Ante Tolj, Helena Blažić
Foreign-Owned Banks and Real Estate Markets in Croatia: A Panel Data Analysis
This paper analyses the role of real estate markets and foreign-owned banks in bank credit growth in Croatia from 1999 to 2008 by applying panel data analysis. This paper gives a more profound explanation of host countries’ variables influencing bank orientation towards housing credit in the home county. We explain the channel through which the foreign-owned banks can facilitate domestic demand for housing and push the housing bubble, motivated by determinants outside the host country. Our results suggest that foreign-owned banks’ orientation to real estate markets increased credit supply to all private sectors in Croatia during the credit boom in 1999–2008.
Ana Rimac Smiljanić, Blanka Škrabić Perić
Financial Cooperatives Development in Croatia: Social Capital Perspective
Financial cooperatives are member-owned institutions that operate on seven principles, all of which depend on social capital. The paper aims to establish the relationship between social capital and the depth of the financial cooperative sector, analyse both concepts and assess the development prospects of financial cooperatives in Croatia from a social capital perspective. Also, the purpose of the paper is to highlight the role of social capital—that per se generates positive externalities on economic growth—in the development of financial cooperatives, which further foster regional development, mitigate intertemporal risks, provide greater community resilience and have a positive impact on GDP growth. Cross-country analysis will be performed using descriptive statistics to present secondary data related to both concepts, for the Republic of Croatia and the rest of the EU-27 countries. One could conclude that Croatia has low levels of both bridging and linking social capital, and at the same time, that cooperative and mutual sector are poorly developed. Therefore, to boost economic growth, public and local policies should concentrate on the development of social capital in the region, which would also increase people’s willingness to form financial cooperatives, as well as other forms of social economy necessary to enhance sustainable economic growth.
Ingrid Omerzo, Jakša Krišto
EU Tax and Agricultural Policy in the Wine Sector
The European Union’s (EU) agricultural sector faces a number of challenges due to climate changes and depopulation of rural areas, which affects biodiversity, land and water quality, and food supply. For those reasons, the agricultural sector and agricultural policy, which have been constantly changing in the recent decades to tackle existing challenges, attract the attention of scientists and the public. The wine sector is an important segment of the EU agriculture. The EU, as a world leader in the wine industry with 65% of the world wine production, 60% of global consumption, and 70% of exports, under the Common Agricultural Policy (CAP) focuses on improving the competitiveness of the wine sector. Since the New World countries entered the EU market, maintaining and increasing wine sector competitiveness has become more important than ever. The main goal of this paper is to analyse how tax and agricultural policies affect the EU wine sector competitiveness. The empirical research was conducted on the panel data on wine production, consumption, exports, excise duties on wine, and VAT for 15 selected EU Member States, for the period 2005–2019. We estimated the econometric fixed-effect model. Our results indicate that tax and agricultural policy have an impact on the wine sector competitiveness.
Jana Katunar, Maja Grdinić, Dario Maradin
Integration as an Indicator of (under) Development of the Croatian Capital Market
Acquisition processes are considered to be the acquisition of a company or a significant share in the equity of other companies, regardless of whether this was achieved by purchasing the property or ownership share of the acquired company or by pooling ownership interests. A takeover is considered hostile if management officially rejects the takeover bid. In countries whose capital markets are dominated by banks, including Croatia, companies are significantly more protected from hostile takeovers compared to economies with developed financial markets. The authors explore the features of integration processes, with special emphasis on hostile takeovers in the context of the development of the Croatian capital market. The results of primary research indicate its relative underdevelopment, which can be related to the achieved degree of institutional stability as one of the preconditions for its development.
Sanel Haistor Ramić, Dario Silić, Denis Buterin
Perspectives and Challenges in the Development of the Croatian Digital Startup Sector
Startups are an inevitable part and active drivers of the digital economy. The number of digital startups is growing rapidly and their business model has proven successful in doing business in the context of the global health and economic crisis. The attributes of high innovation and significant potential for achieving rapid growth and a scalable economic model make them relevant participants in creating contemporary economic conditions, especially in the digital economy. The purpose of this paper is to point out the importance of the development of the digital startup sector as one of the crucial drivers of economic growth and development, and the achievement of both economic and social benefits. The research objective is to study and discuss the current state of the Croatian digital startup sector and to identify perspectives and challenges, as well as to put forward recommendations for its further development based on available secondary data. The analysed data suggest that the main determinant of the entrepreneurial ecosystem is its insufficient adaptation to the specific needs of startups, and hence the digital startup sector in Croatia is at a low level compared to other countries in the region of the same development group.
Mirjana Grčić Fabić
Pension Funds Regulation in the Context of Investment Climate Development
Many Central European countries, including Croatia, have still not reached the desired regulatory and institutional level of the financial sector required for the development of a favourable business environment. The aim of this paper is to emphasise the key impact of financial system regulation on the development of investment climate by analysing mandatory pension funds (MPF) as an ever-growing element of the Croatian financial system. The objective of this paper is to show the quantitative impact of potential changes in the regulation of MPFs on investments in Croatia and, consequently, on the improvement of the business environment as an important element of economic growth. For this purpose, a comparative analysis of the regulation of MPFs in Croatia and the European Union (EU) was conducted and projections of a potential rise in investments were made, taking into account possible alignment with the trends in the EU-15 through regulation relaxation. The results clearly show that Croatia is slowly following EU trends, and it can be concluded that a change (in terms of relaxing) in MPF investment regulation can contribute to investment growth, improvement of the investment climate and business environment, and it can thus stimulate economic development, but with the careful assessment and balance of potential risk and returns of MPF portfolios.
Ivana Bestvina Bukvić, Dražen Novaković, Ivan Kristek
Challenges of Energy Policy within Decarbonisation: Evidence of the European Union
Decarbonisation is a serious and comprehensive process of reducing carbon emissions that affects all areas of life, especially energy policy. This study aims to analyse the role of renewable energy sources, electricity prices and the level of economic development on final energy consumption and greenhouse gas emissions. For this purpose, a panel data analysis with fixed and random effects was carried out for 27 EU Member States over the period 2019–2009. The results show that, as economic activity increases, energy consumption also increases, but GHG emissions per capita decrease. The use of renewable energy sources reduces GHG emissions per capita but also has the effect of decreasing final energy consumption. Electricity prices showed no statistically significant relationship with total energy consumption or GHG emissions per capita. Decarbonisation definitely affects the energy strategy by encouraging the use of renewable energy sources in all sectors—transport, household and industry. Renewable energy sources, especially in electricity production, will be the backbone of energy strategies in the EU Member States.
Barbara Fajdetić
Real and Financial Sectors in Post-Pandemic Central and Eastern Europe
herausgegeben von
Prof. Bojana Olgić Draženović
Prof. Vesna Buterin
Prof. Stella Suljić Nikolaj
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