The Impact of Kuna Exchange Rate Volatility on Croatian Exports

The aim of this paper is to analyze the monetary transmission mechanism through the influence of exchange rate variability on export volume. To date it has been very common to use “historical volatility” as an approximation for exchange rate variability in empirical studies. However, many macroeconomic time series are characterized by heteroskedasticity, i.e. their variance is not constant over time. Thus in this paper the ARCH model is proposed as a model of conditional heteroskedasticity. Also, as an alternative to ARCH we will introduce historical volatility based not only on future but also on past exchange rate values. In exploring the influence of exchange rate volatility and domestic income on export volume, Johansen’s multivariate cointegration approach and error-correction model (ECM) are used. The short run and long run relationships are analyzed separately. The results of econometric analysis draw attention to the different strengths of the relationship between kuna volatility and exports for the two proposed models. The first model shows a mild negative long-run relationship, while the second shows the much stronger aversion of Croatian exporters to volatility as a measure of exchange rate uncertainty

The Impact of Kuna Exchange Rate Volatility on Croatian Exports

The aim of this paper is to analyze the monetary transmission mechanism through the influence of exchange rate variability on export volume. To date it has been very common to use “historical volatility” as an approximation for exchange rate variability in empirical studies. However, many macroeconomic time series are characterized by heteroskedasticity, i.e. their variance is not constant over time. Thus in this paper the ARCH model is proposed as a model of conditional heteroskedasticity. Also, as an alternative to ARCH we will introduce historical volatility based not only on future but also on past exchange rate values. In exploring the influence of exchange rate volatility and domestic income on export volume, Johansen’s multivariate cointegration approach and error-correction model (ECM) are used. The short run and long run relationships are analyzed separately. The results of econometric analysis draw attention to the different strengths of the relationship between kuna volatility and exports for the two proposed models. The first model shows a mild negative long-run relationship, while the second shows the much stronger aversion of Croatian exporters to volatility as a measure of exchange rate uncertainty

EKONOMSKE INTEGRACIJE I PRETPOSTAVKA PARITETA KUPOVNE MOĆI

The goal of the paper is to investigate in which way economic integration and economic relations affect mean reverting properties of real exchange rates. We have employed unconstrained and constrained augmented Dickey-Fuller unit root test and Im Pesaran Shin panel unit root test in order to investigate mean reverting properties of real exchange rates in transition, ASEAN, MERCOSUR countries and China vis à vis Germany and the USA. Our analysis is interesting due to the fact that it provides evidence of the impact of (further) integration on the problems with price competitiveness in EU and EMU periphery countries. Evidence suggests that economic relations of ASEAN and MERCOSUR countries vis à vis the USA and transition countries vis à vis Germany are affecting mean reverting properties of relative exchange rates. In all three groups of countries evidence of stationarity of real exchange rates is much stronger vis à vis major economic partner.Cilj rada je istražiti na koji način ekonomske integracije i ekonomski odnosi utječu na trend kretanja prosječnih vrijednosti stvarnog tečaja. Koristili smo neograničeni i ograničeni prošireni Dickey-Fullerov test jediničnog korijena i Im Pesaran Shin panelni test jediničnog korijena kako bismo istražili trendove kretanja prosječnih vrijednosti stvarnog tečaja u tranzicijskim zemljama, zemljama ASEAN-a, MERCOSUR-a i Kini u odnosu na Njemačku i SAD. Naša je analiza interesantna stoga što pruža dokaze o utjecaju (daljnje) integracije oko problema s konkurentnosti cijena u perifernim zemljama EU-a i EMU-a. Dokazi upućuju na to da gospodarski odnosi zemalja ASEAN-a i MERCOSUR-a s SAD te tranzicijskih zemalja s Njemačkom utječu na trend kretanja prosječnih vrijednosti relativnog tečaja. U sve tri grupe zemalja dokaz o stacionarnosti stvarnog tečaja je puno jači u usporedbi s najvećim ekonomskim partnerom

Economic uncertainty and suicide mortality in post-pandemic England

This paper examines the relationship between different dimensions of economic uncertainty and suicide rates in England from 1985 to 2020, both in the short and long term. The study employs a non-linear autoregressive distributed lag framework for cointegration estimation. This approach allows testing for the existence of possible asymmetries in the response of suicide mortality to increased economic uncertainty. Uncertainty is gauged by different proxies that allow computing financial uncertainty and labour market uncertainty indicators. The analysis is replicated by gender and across regions, controlling for unemployment and economic growth. Overall, the analysis suggests that uncertainty intensified during the first year of the COVID-19 pandemic. This is in line with the stylized facts of economic uncertainty and its pronounced role in recessions. When replicating the experiment by gender, we find that women seem to be more sensitive to changes in uncertainty. Regarding the existence of asymmetries, we found that decreases in economic uncertainty have a greater impact on suicide mortality than increases

Income inequality and redistribution in Scandinavian countries

This paper investigates the adjustment of government redistributive policies in Scandinavian countries following changes in income inequality over the period 1980-2021. We use two complementary measures of inequality: the share of total income accruing to top percentile income holders, as well as the ratio of the share of total income accruing to top decile income holders divided by that accumulated by the bottom 50%. We find that the sign of the relationship between inequality and redistribution is mostly positive and time-varying. We also find significant evidence that redistributive measures in the form of taxes and government transfers adjust more rapidly in an upward than a downward direction, with the exception of Norway. We obtain a significant long-run relationship between both variables in Iceland and Sweden, while in Norway it just holds for the short run

Can Croatian Consumers Predict Inflation Dynamics?

Postoji relativno opsežna literatura o procesu generiranja inflacije u Hrvatskoj. Međutim, nijedna se postojeća studija ne dotiče psiholoških odrednica inflacije. Stoga je cilj ovog rada napraviti doprinos u tom smjeru. Primjenom Carlson-Parkinove metode na rezultatima ankete pouzdanja potrošača dobiven je numerički indikator očekivane inflacije, te su analizirana njegova prediktivna svojstva u odnosu na stvarna inflatorna kretanja. Pokazalo se da su hrvatski potrošači pristrani u ocjeni budućih kretanja inflacije, što u promatranom kontekstu implicira empirijsko nepostojanje racionalnih očekivanja. Unatoč tome, prognostičke pogreške potrošača ne mogu se ekonometrijski objasniti niti jednom promatranom makroekonomskom varijablom osim same inflacije. Dakle, inflacijska očekivanja hrvatskih potrošača su efikasna u jakom smislu.There exists a variety of papers dealing with the inflation generating process in Croatia. However, none of them touches upon the psychological factors driving inflation. Therefore this paper aims to fill in that niche. Applying the Carlson-Parkin method on consumer survey results, a direct measure of expected inflation is obtained. Its predictive characteristics regarding actual inflation dynamics are examined. It is found that Croatian consumers tend to produce biased expectations of actual inflation; hence they are proven not to be strictly rational in forming inflation expectations. Nevertheless, the consumers’ expectation errors are not significantly influenced by the other observed macroeconomic variables. In that regard, the consumers’ inflation expectations can be characterized as efficient in the strong sense

Utjecaj volatilnosti tečaja kune na hrvatski izvoz

Cilj rada je istražiti funkcioniranje mehanizma monetarnog prijenosa na osnovi utjecaja varijabiliteta tečaja kune na veličinu izvoza. U dosadašnjim se empirijskim studijama za aproksimaciju varijabiliteta tečaja najčešće koristila tzv. historijska volatilnost. Međutim, mnogi makroekonomski vremenski nizovi pokazuju obilježja heteroskedastičnosti, odnosno njihova varijanca nije konstantna kroz vrijeme. Stoga je u ovom radu za analizu volatilnosti predložen model uvjetne heteroskedastičnosti, odnosno ARCH model. Kao alternativa ARCH modelu uzeta je i historijska volatilnost, pri čijem računanju nisu korištene samo buduće, već i prošle vrijednosti tečaja. U istraživanju utjecaja volatilnosti tečaja i domaćeg dohotka na veličinu izvoza primijenjen je Johansenov multivarijatni kointegracijski pristup, te model korekcije odstupanja (ECM). Pri tome je odvojeno promatran njihov kratkoročni i njihov dugoročni odnos. Rezultati ekonometrijske analize pokazuju različitu čvrstoću dugoročne veze volatilnosti i izvoza za dva predložena modela. Prvi model upućuje na blagi negativni utjecaj, a drugi na mnogo jaču averziju hrvatskih izvoznika na volatilnost kao mjeru rizika realnog tečaja kune

Can Croatian Consumers Predict Inflation Dynamics?

Postoji relativno opsežna literatura o procesu generiranja inflacije u Hrvatskoj. Međutim, nijedna se postojeća studija ne dotiče psiholoških odrednica inflacije. Stoga je cilj ovog rada napraviti doprinos u tom smjeru. Primjenom Carlson-Parkinove metode na rezultatima ankete pouzdanja potrošača dobiven je numerički indikator očekivane inflacije, te su analizirana njegova prediktivna svojstva u odnosu na stvarna inflatorna kretanja. Pokazalo se da su hrvatski potrošači pristrani u ocjeni budućih kretanja inflacije, što u promatranom kontekstu implicira empirijsko nepostojanje racionalnih očekivanja. Unatoč tome, prognostičke pogreške potrošača ne mogu se ekonometrijski objasniti niti jednom promatranom makroekonomskom varijablom osim same inflacije. Dakle, inflacijska očekivanja hrvatskih potrošača su efikasna u jakom smislu.There exists a variety of papers dealing with the inflation generating process in Croatia. However, none of them touches upon the psychological factors driving inflation. Therefore this paper aims to fill in that niche. Applying the Carlson-Parkin method on consumer survey results, a direct measure of expected inflation is obtained. Its predictive characteristics regarding actual inflation dynamics are examined. It is found that Croatian consumers tend to produce biased expectations of actual inflation; hence they are proven not to be strictly rational in forming inflation expectations. Nevertheless, the consumers’ expectation errors are not significantly influenced by the other observed macroeconomic variables. In that regard, the consumers’ inflation expectations can be characterized as efficient in the strong sense

Utjecaj volatilnosti tečaja kune na hrvatski izvoz

Cilj rada je istražiti funkcioniranje mehanizma monetarnog prijenosa na osnovi utjecaja varijabiliteta tečaja kune na veličinu izvoza. U dosadašnjim se empirijskim studijama za aproksimaciju varijabiliteta tečaja najčešće koristila tzv. historijska volatilnost. Međutim, mnogi makroekonomski vremenski nizovi pokazuju obilježja heteroskedastičnosti, odnosno njihova varijanca nije konstantna kroz vrijeme. Stoga je u ovom radu za analizu volatilnosti predložen model uvjetne heteroskedastičnosti, odnosno ARCH model. Kao alternativa ARCH modelu uzeta je i historijska volatilnost, pri čijem računanju nisu korištene samo buduće, već i prošle vrijednosti tečaja. U istraživanju utjecaja volatilnosti tečaja i domaćeg dohotka na veličinu izvoza primijenjen je Johansenov multivarijatni kointegracijski pristup, te model korekcije odstupanja (ECM). Pri tome je odvojeno promatran njihov kratkoročni i njihov dugoročni odnos. Rezultati ekonometrijske analize pokazuju različitu čvrstoću dugoročne veze volatilnosti i izvoza za dva predložena modela. Prvi model upućuje na blagi negativni utjecaj, a drugi na mnogo jaču averziju hrvatskih izvoznika na volatilnost kao mjeru rizika realnog tečaja kune