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The mobility of factors of production from the very beginnings of the theory of the optimal currency area (OCA) stands out as one of the primary mechanisms for achieving a balance of payments, i.e. sustainability of the monetary union (Mundell criterion). However, there is a significant qualitative difference between the monetary union of countries with similar income levels and the one with different development stages Namely, in the first case, labor mobility, as a rule, has short-term economic effects, while it has a longer-term (more negative) impact – especially on the long-run aggregate supply (LRAS). Many Eastern European countries, which expressed a desire to become part of European integration and the monetary union after the communist ruin, experienced this. In a previous paper, the authors set the thesis about “Impossible Trinity of Developing Countries”. In this paper, the aspiration is to confirm the validity of this theory by analyzing Greece within the period 1999-2020, specifically observing the impact of three variables (fiscal policy, social development level, and level of economic freedom) on the emigration of the population under conditions of monetary union and labor force mobility. The results obtained in this research indicate that the fiscal policy in the observed period was the most significant factor in explaining migration trends. The implications for developing countries that are currently entering (such as Croatia) or intend to enter the monetary union with more developed countries in the future are particularly significant.

The choice of an adequate risk measure in portfolio optimization depends to a large extent on the characteristics and dynamics of the underlying assets. For investors and asset managers, a range of potential market risks provides much- needed insights into the optimization of their portfolio of assets. Since this paper focuses on multiple risk measures, it presents the investors with a better insight into the potential magnitude of the risk they are faced with. Since the risk-reward optimization target can be adjusted for a broad choice of risk measures in this paper we will test the performance of the classical risk measure i.e. standard deviation versus a tail risk measure such as expected tail loss (ETL). Our goal is to find which of the two offers the better performance for a portfolio of cryptocurrencies and if the differences are statistically significant. The setup for our analysis is testing two optimization targets (MinVar and MinETL) on 10 portfolios of cryptocurrencies randomly chosen from a sample of 70 cryptocurrencies with the highest market capitalization.

The current study investigates how attitudes towards digital transformation and personal innovativeness affect the acceptance of emergency remote learning in the COVID-19 pandemic environment. The pandemic has affected all aspects of societies across the globe, including higher education that was also a significant push-up factor for the digital transformation of higher education. Thus, the main aim of this paper is to investigate the factors affecting emergency remote learning acceptance among the higher education students in Bosnia and Herzegovina (BiH). The results presented in this paper gained from a study carried out among higher education students in BiH cover the period of April – July 2020 via the open-source platform. The study focused on the students’ attitude towards a digital transformation is a significant factor in accepting emergency remote learning. Also, the personal innovativeness score has proven to be a crucial factor for adopting this new learning setting, i.e., more innovative students have a greater emergency remote learning acceptance than students with a lower personal innovativeness score. Hence, this study pinpoints the necessity of changing the attitudes towards technology applications in education. It would increase the usage of remote learning services and provide students with knowledge and skills for the new labour market.

This paper investigates the impact of regional trade agreements (RTAs) on the development of intra-industry trade (IIT) for eight Central and Eastern Europe countries (CEE) from 1997 to 2019. The aim of the paper is to compare and explain the possible heterogeneous impact of different RTAs on IIT across countries while controlling for differences in development levels between economic integration member states. Our analysis is based on country-product level data obtained from UN Comtrade. The main hypothesis of the paper is that the CEFTA and EU integration agreements have a highly positive effect on IIT in comparison with other RTAs. However, the scope of the impact varies across countries, primarily depending on the economic development asymmetries that are in this paper proxied by the GDP per capita. We developed and estimated an augmented structural gravity model using Pseudo-Poisson Maximum Likelihood Estimator. The main contribution of our paper is the inclusion of the FTA-economic development gap interaction term, which enabled us to enrich the empirical findings of the research. Our results show that the main hypothesis holds, but also that an increase in economic asymmetries between integration members negatively affects IIT, thus indicating potentially increasing trade adjustment costs for new member states of an integration. These results go in favor of EU pre-integration and post-integration policies that have the goal of diminishing the economic development gap between future and present integration members.

A concept of relationship marketing in tourism implies creating quality relations among all participants in the tourist supply chain. Analyzing the assumptions of the development of relations and their impact on the overall performance of companies in tourism is especially important. In this regard, the subject matter of this research is the application of relationship marketing in travel agencies in Serbia and the identification of key factors of loyalty of users of tourist services. This paper aims to investigate the influence of relationship marketing assumptions (such as trust, customer complaint management, investment in internal marketing, implementation of information technology in agencies, business image and tradition of agencies, as well as socio-demographic characteristics of clients) on the choice of travel agency through which clients will travel. The contribution of the paper is in the application of the logistics model in the research of relationship marketing in agencies. The results of this research have confirmed that investing in relational determinants in tourism leads both to the development of a long-term relationship with customers and to business performance improvement. Also, the results showed that customer profiles are important in the implementation of relationship marketing to increase the number of loyal customers in tourism. The importance of the paper is in proposing an efficient model for the application of relationship marketing in order to increase the level of customer loyalty in travel agencies operating on the Serbian market

The paper develops a dynamic panel model of target adjustment in order to investigate the determinants of the cash conversion cycle of companies in manufacturing, trade, and information and communication industries in the Republic of Croatia for the period 2008-2015. The emphasis is on examining the significances and the speeds of the adjustment processes of the cash conversion cycles of companies subsamples by industry and size. Due to the adjustment costs, the results show that the observed companies gradually adjust their current cash conversion cycles to the target ones. In addition, these adjustments were slow, which can be explained by the predominance of the adjustment costs over the costs of being in disequilibrium. Moreover, the results of this study indicate that the rate of adjustment varies among companies from different industries and size categories. The differences in market power allow companies to change more easily the components of the cash conversion cycle. As a result, they enable faster convergence to their target levels. Besides the lagged cash conversion cycle, tested potential determinants that significantly affect the cash conversion cycles of Croatian companies in selected industries, although with different robustness, are company size, company growth, return on assets, fixed asset investments, financial leverage and the growth of the real gross domestic product. Finally, the paper presents a new measure for working capital management performance

In this paper we provide new empirical evidence relevant for discussions on monetary policy independence in the context of euro adoption in three Central and Eastern European (CEE) countries: Czechia, Hungary and Poland. Unlike many other authors, in this paper we focus on real and not nominal interest rates as real interest rates are at the hearth of modern macroeconomic and monetary policy theory. In the paper we employ several methodologies to test the convergence of real interest rates between these countries and the euro area and to determine the main drivers of real interest rates. Based on the unit root analysis we find evidence of convergence of real interest rates in these countries, thus confirming the real interest rate parity (RIRP) hypothesis. Next, using principle component analysis (PCA) we show that common factor extracted from the sample of CEE countries and individual euro area countries can explain high proportion of real interest rate developments in these countries. Finally, results of our newly proposed analytical framework for the analysis of determinants of real interest rates in small open economies, based on a Bayesian VAR model with block exogeneity, show that external shocks have non-negligible effect on real interest rate developments in selected CEE countries. Thus, our results indicate that real interest rates in CEE depend on factors that are beyond the scope of domestic monetary policy makers. In this sense we can conclude that (conventional) monetary policy independence in these countries is limited. Thus, we see the loss of monetary policy independence as overly emphasized argument in discussions on the euro adoption in these countries. However, we are aware that national central banks in CEE started to rely more on non-conventional measures recently, which gives them a higher degree of flexibility (and autonomy).

This study provides empirical evidence on income smoothing from the banking sector in nine South-Eastern Europe (SEE) countries for the period 2005-2014 by applying a number of methodological approaches. First, by using a sample of 321 banks this paper confirms our first hypothesis that banks in the SEE region use loan loss provisions (LLPs) to smooth their incomes. Second, by dividing the loan loss provision into its two components (discretionary and non-discretionary,) the study provides new evidence on the effects of loan loss provisions components on growth in bank lending. The results clearly prove our second hypothesis that the components of LLPs do matter on growth in bank lending. Third, this paper estimates the use of loan loss provisions for capital management by banks. The empirical results do not support the hypothesis of capital management for SEE banks. The novelty of this paper, unlike other works, is the inclusion of SEE countries.

The main objective of this research paper is to examine the impact of board size and ownership concentration, representing corporate governance mechanisms, on agency costs in large Croatian companies. Furthermore, debt financing and firm growth are examined because those variables also have impact on agency costs. Agency theory defines a framework for the potential issue of the separation of ownership and management as well as for the conflict between stakeholders (principals) and managers (agents). The most significant principal-agent problems are agency costs, but they do not have a directly quantifiable value; hence, in this research paper, the asset turnover ratio is used as the approximation. Therefore, this research will empirically test the significance of the impact of board size, ownership concentration, debt financing and firm growth on agency cost in the observed period from 2014 to 2018 using panel data analysis. This research was conducted with large Croatian companies using data and information from official annual accounts primarily to ensure objectivity, standardization and comparability. Specifically, the analysis was conducted on 219 companies operating in two main categories of economic activity: Manufacturing (C) and Wholesale and retail trade (G). The results indicate that board size has a significant but negative impact on agency costs. The results also indicate that debt and growth have a significant and negative impact on agency costs. Ownership concentration was not found to have significant impact.

Due to the growing importance of new generations in upcoming market trends, attitudes, and behaviors of the young generation (Millennials and Z generation) towards the use of the sharing economy (SE) concept in Croatia were explored. The literature that connects SE and sustainability, and the Millennials and Z generation, with economic, social, technological, and environmental SE factors, was examined. A survey on a sample of 181 respondents was also conducted. The results present the attitudes of the young generation on SE factors, which SE concepts they use, and which they intend to use. Good command of new technologies, ratings and comments on the Internet are important. SE brings benefit to individuals and the economy and helps in preserving the environment. The biggest disadvantages of SE are pricing and socialization, while the advantage is accessibility. Those who use it least often have a significantly lower perception of the safety. The Z generation values influencer recommendations in SE usage more than Millennials. Also, younger participants, those who are more of a Z generation, had a lower perception that sharing helps in waste reduction. Booking.com and Uber are most often used, and apps for food delivery and skill sharing have the greatest perspective. This paper provides information about the attitudes, behaviors, and motivation of young people for using certain categories of SE, for both policymakers and managers of companies involved in SE businesses.

The main objective of this paper is to identify the most important direct and indirect sources of water use in the Croatian economy and, based on that, to identify the key drivers of water use in the process of Croatian national production. For this purpose, water extended input-output model was constructed and empirically applied in the paper, based on which the indicators of direct, indirect, and cumulative water intensities of production sectors in the Croatian economy have been quantified and analysed, including their cumulative and indirect water use multipliers. Using the aforementioned model, the paper also assesses and analyses domestic, net imported, and total water footprints of production sectors in the Croatian economy, as well as the relative strength of pull-and-push effects of their water use. For the purpose of model construction, the last published input-output table of the Croatian economy for 2010 and the reference data of the Croatian official water statistics were used. The results of the model indicate that direct and indirect water use flows in the Croatian economy are mostly determined by intermediate processes of generating and using the output of the power, chemical, and oil-processing sector. Through the application of the model, it has also been found that these sectors dominate in the structure of the total water footprint of the Croatian economy, whereby the Republic of Croatia, overall, achieves a surplus in the international exchange of virtual waters. Given the new findings on indirect and cumulative water use flows in the Croatian economy, the author’s recommendation is that the multiplicative effects of inter-sectoral dependencies in the processes of national production on the total water use must be taken into account when conducting future activities of planning, management, and protection of Croatian water resources.

External financial market data institutions (vendors) may provide different prices for the same US municipal bond due to differences among market participants in perception about its market value. The valuation control function will include only selected vendors in the calculation of the consensus price, which enters as a benchmark price in the price testing process. Selection of vendors is largely driven by the valuation control function’s consideration of their valuation capabilities and their market coverage. Empirical analysis in this paper shows that additional pricing service may bring additional pricing information to the final consensus price, which may significantly alter the benchmark price and final price testing results. The approach described in this paper is in interest of any financial institution with US municipal bonds in the trading portfolio. Contribution of this paper to valuation of US municipal bonds is high because remaining literature does not explain alternative approach to measurement of additional pricing information in the benchmark price.

This paper analyses the factors determining inward foreign direct investment, particularly the role of natural endowments and economic and political characteristics of the host country. It expands on the existing literature by focusing on four broad groups of countries: advanced , emerging-market, developing and transition economies, comprising of more than 100 countries in a panel data setting for the period 1996 – 2016. The paper also examines the scenario during the major economic crises ‒ Asian crisis, Dotcom Bubble, Global Financial crisis and Sovereign Debt crisis. The results indicate that the determinants of inward foreign direct investment have changed over time and that the patterns are not uniform across the four country groups. Furthermore, the paper compares the determinants of two major country groups, namely ‒ emerging-market and developing countries by conducting Chow test for equality of coefficients. It is seen that the economic growth and market size has a stronger positive influence on inward FDI flow to emerging-market than to developing economies. Also, emerging-market economies experienced a smaller flow of FDI during Global Financial crisis compared to developing economies. These results have important implications for the policy makers as they can help to identify the regional factors that attract capital inflows.

In this paper, we will present the results of our survey on TFP and its main drivers. For this purpose, our analysis is based on a sample of thirteen EU countries for the period 1995 - 2016. In the first iteration, we have estimated the TFP for selected countries. The main goal of this paper is to determine the existence of a long-run relationship, ie. cointegration between the TFP and its main drivers. To do so, in the second iteration we have used the relatively new panel ARDL (Autoregressive Distributed Lag) model proposed by Pesaran (1997) and Pesaran and Shin (1999). The obtained results in this paper reveal the existence of a long-term relationship, i.e. co-integration between the TFP on one hand, and R&D, and ICT, on the other hand, confirming the basic hypothesis that there is a long-term and statistically significant relationship, i.e. co-integration between the above-mentioned variables.

Higher crime rates lead to the increasing fear and anxiety in society and disturb the social structure and harmony in the country. In the last decades, many scientists depict a decrease in economic factors, such as GDP per capita, unemployment rate, poverty, etc. as the primary drivers of crime both in developed and in developing countries. Even during the periods of economic crises, crime rates in the European Union (EU) continued to either decline or remain the same, thus bringing into question the impact of economic factors on crime rates in the EU. The paper examines the impact of changing economic conditions on crime rates in EU countries, employing nowadays vastly used methods in economics to address endogeneity. The aim of the paper is to empirically estimate the relationship between crime rates and economic factors, using previously developed methods. After a series of robustness checks, estimations did not provide evidence of a significant relationship between economic conditions and crime rates over the last decade in EU countries, except for homicides in some model specifications.

Investment in research and development (R&D) creates preconditions for the implementation of more advanced and better technologies. It enables the introduction of new products or production processes which can result in higher earnings and potential economic growth. Even though research and development is a catalyst for the genesis of aggregate economic activity, its importance is not widely researched at regional levels. The European Union has defined strategies which view innovation as an essential element in stimulating growth and job creation. The aim of this paper is to establish and measure the impact of investment in R&D on economic growth of port regions. The data used in this research were panel data of the European Union’s port regions for NUTS 2 classification for the period from 2005 to 2015. The results of the two-step Generalized Method of Moments (GMM) indicate that investment in R&D has a significant impact on the economic growth of the port regions in European Union. However, in order for innovations to be accepted and implemented, it is also necessary for regions to have specific economic structure which was further analyzed in this paper. Regions with high innovation capacity create greater economic benefits and are considered to grow faster than other regions.

The paper aims to examine persistence of shocks in returns on CDS for 5Y Croatian bonds. Based on sample of daily data from January 6, 2004 up until December 13, 2019 the paper evaluated research hypothesis that assumed persistence of shocks in returns on 5Y Croatian bond. To evaluate the research hypothesis, the paper employed quantile autoregression approach and nonparametric time varying autoregreession approach. The empirical results rejected the research hypothesis assuming persistence of shocks in returns on CDS for 5Y Croatian bonds. Based on the results from this paper, returns on CDS from for 5Y Croatian bonds are in line with efficient market hypothesis for endogenous shocks of small magnitude and at the highest level of endogenous shocks. Furthermore, efficient market hypothesis holds during the calm periods, while during the periods with more dynamics in CDS prices the paper suggests profitable strategy for trader and investors. Eventually, the paper contributes to the ongoing discussion regarding efficient market hypothesis while revealing the case of returns on CDS for 5Y Croatian bonds. Furthermore, the paper suggests trading and investment strategies for investors.

Online local budget transparency (OLBT) has been recognized as an important feature of good governance. Accordingly, in this paper, OLBT is measured in all 128 cities and a sample of 100 municipalities in Croatia using several key local budget documents published on local government websites. Using a fixed effect Poisson panel model covering the 2013-2017 period, it is shown that along with residents’ income and fiscal capacity of local governments, political ideology and political competition determine the level of OLBT. This paper contributes to the growing body of budget transparency literature by establishing the importance of political factors as determinants of OLBT in this former socialist, fiscally centralized EU member state and reveals the curious stubbornness of the citizens who consistently vote for non-transparent politicians. The main finding is that political factors (political ideology and political competition) matters in determining OLBT, resulting in suboptimal equilibrium of local governments with low levels of OLBT. The local incumbent concludes that OLBT is not a high priority and that his/her constituency will not hold it against him/her. In this environment such a conclusion stands owing to the fact that voters who are stubborn in their voting patterns refuse to change the incumbent who created nontransparency.

Over the past decade, a number of papers attempt to capture the decisive impact of trade facilitation on international trade. Since the emergence of trade liberalization and tarrif reduction, trade facilitation analysis has been put in the spotlight. Trade facilitation is defined as all measures that reduce trade costs other than lowering tariffs. Therefore, the aim of this paper is to empirically examine the impact of trade facilitation from the logistics perspective on international trade distinguishing between low, middle and high income importing countries. We used the augmented gravity model to estimate this relationship across 150 countries within the period 2007-2016. The Logistic Performance Index (LPI) created by the World Bank is used as a proxy variable for trade facilitation. The results of our analysis show that all used variables are significant and show the expected signs correspondingly to our hypotheses, suggesting that trade will increase with trade facilitation. The results also lead to the conclusion that exporter logistics performance seems to be more important than importer logistics performance. This paper supports the World Bank trade facilitation initiatives to assure lower trade costs as they serve as a barrier to enjoying the benefits of increased trade.

Starting from 1920, the growing body of research has been focused on the role of psychological factors in cycle theories. Mainstream macroeconomic models are insufficient for exploring interaction among economic agents, financial institutions, and the real sector of economy. This paper is among the first to show the synchronization of financial and business cycles through the trust cycle but with a certain delay in terms. The paper presents the conceptualization of trust as a combination of two pillars – structure-based confidence based on objective information about system competences, regulations, and norms, and sentiment-driven actions of economic agents (feelings, emotions, and other subjective characteristics). The paper offers a theoretical descriptive model of a trust cycle that allows exploring several stages of correlation between financial fluctuations, trust changes, and large swings in business cycle.

The empirical literature on credit risk is mainly based on modelling the probability of default, omitting the modelling of the loss given default. This paper is aimed to predict recovery rates on the rarely applied nonparametric method of Bayesian Model Averaging and Quantile Regression, developed on the basis of individual prudential monthly panel data in the 2007–2018. The models were created on financial and behavioural data that present the history of the credit relationship of the enterprise with financial institutions. Two approaches are presented in the paper: Point in Time (PIT) and Through-the-Cycle (TTC). A comparison of the Quantile Regression which get a comprehensive view on the entire probability distribution of losses with alternatives reveals advantages when evaluating downturn and expected credit losses. A correct estimation of LGD parameter affects the appropriate amounts of held reserves, which is crucial for the proper functioning of the bank and not exposing itself to the risk of insolvency if such losses occur.

In the contemporary circumstances, intellectual capital has become the engine of the economic, social and cultural development. Mobilization and utilization of intellectual resources in enterprises create value, thus transforming and accelerating development of national economies towards the knowledge and innovation based economies. Due to these reasons, the most developed economies increase investments in education, information technologies and stimulate innovativeness. On the other hand, less developed countries do not have possibilities for significant investments in creating and employing national intellectual potential. This is reflected in their economic growth rates, as in the case of the Southeastern European (SEE) countries. In that regard, the paper investigates the impact of education, information technologies and innovations, as determinants of national intellectual capital development, on the economic growth in the SEE countries. The aim of this paper is to identify the contribution of the key intellectual capital determinants to the economic growth and development in the SEE countries and propose measures whose implementation lead to further development towards knowledge and innovation economies. The results of correlation analysis revealed positive and statistically significant correlation between GDP per capita and employed measures of national intellectual capital. The research has shown that increase in high-technology export, number of R&D researchers and mobile phone subscribers has a positive and significant impact on economic growth. The authors advise intensified cooperation between business community and institutes and universities to achieve synergetic effects in generating and utilising national intellectual potential.

Knowledge economy is an economy that produces, distributes and uses information. Nowadays, investment in quality information rather than capital inputs is becoming more and more important for countries to develop and to be able to compete with each other. The increasing speed in the creation and spreading of knowledge has made it a crucial component in economic development. It is a fact that the countries that make large investments in information factors experience a fast and sustainable growth and are the most dynamic and competitive countries in the world. In this paper, we use context dependent DEA to measure the relative efficiency of the European Union (EU) countries’, including Turkey, knowledge economy policy based on 2016 data. In addition, we implement factorspecific DEA in order to identify achievable targets in short term for each output of countries. Four outputs and three inputs were used in the analysis. The results showed that Germany is clearly ahead of other countries such as France, England, Malta and the Netherlands. Turkey, on the other hand, separates from other countries and is the least efficient one. The reason for this separation is that Turkey produces less output than expected relative to its facilities. Another conclusion of the paper is that the countries’ patent applications and high-tech exports are more inefficient than other knowledge economy outputs.

Analysing push and pull determinants of capital flows has become increasingly important with global financial crisis. Namely, global financial crisis has shown that large and volatile capital flows can pose risks, especially, for small and open economies. In this paper we are particularly interested to analyse the vulnerability of capital flows in country with limited monetary policy. We are focused on Montenegro, the country that unilaterally adopted euro in 2002 and regained independence in 2006. Since then, Montenegro has become very attractive for investments and has received significant amounts of foreign capital. Thus, in this paper we are assessing how global shocks could be dangerous for such a small open economy. In addition, we are interested in investigating whether domestic factors can influence capital flows due to the full euroization. In order to answer these questions, we have applied structural vector autoregressive model of the determinants of two main components of capital flows, foreign direct investments and portfolio investments separately, using quarterly data from 2005 to 2017. We provide evidence that mainly push factors, such as foreign output, interest rates and euro area risk sentiment, significantly explain the variation of capital flows. Furthermore, domestic factors are found to play little role for capital flow developments in Montenegro.

The paper brings the determinants of Croatian current account dynamics under monetary and absorption approach. The main hypothesis of the paper assumes that Croatian current account can be explained within the framework based on the monetary and absorption approach to balance of payments. The research employed newly developed Non-linear Auto-Regression Distributed Lag (NARDL) approach that takes into account nonlinear and asymmetric nature of the relationship between Croatian current account and its determinants. Estimated results on a quarterly data sample from the first quarter of 2000 to the second quarter of 2017 supports the main research hypothesis and reveals that that Croatian current account can be explained using the analytical framework based on the monetary and absorption approach. Domestic demand, real exchange rate index, loans to private sector and monetary aggregates M4 are tested as the determinants of Croatian current account. Monetary aggregates M4 are found to hold the highest explanatory power among tested monetary variables. The main findings of the paper suggest the need for fiscal policy measures and relaxing the liquidity constraints for the Croatian exporters as necessary to obtain external equilibrium.

Location theory is studying the impact of location on any economic activity, trying to understand where operations should be settled and what should be the reason for such a decision. The aim of this paper is to discuss and prioritize the key location determinants for successful selection of an optimal location for a business unit in the ICT industry. It emphasizes the importance of this concept in ICT sector today when the digitalization and big internet revolution occurs. The initial determinants were formed based on the literature review and evaluated through two rounds of the Delphi study among experts from ICT companies in Serbia. The second goal of the study was to reach a consensus about the relative importance of the agreed determinants. According to the obtained results using the AHP decisionmaking model, the priority in selecting a location for a business unit in the ICT industry is human resource availability, second is the political and economic environment, and the third is the competition. The paper finds that political and economic strategies start to play an important role in ICT market, as governments are getting more interested in this industry. The study confirmed that due to a shortage of labour supply and fierce competition in the ICT sector, the concept of location selection is an important success factor for sustainable growth and development of ICT organizations

In this paper we calibrate a small open economy (SOE) New-Keynesian DSGE model for the Croatian economy. The main focus of the paper is on the effects of fiscal policy, more precisely government consumption, on employment, output, inflation and trade balance. After we analyse the model impulse responses we confront these results with the empirical results of VAR model. Our results indicate that the presented DSGE model can be a useful starting point and a toolkit in fiscal policy analysis in Croatia as estimated impulse responses from VAR model mostly match impulse responses from the calibrated model. Also, empirical results indicate that fiscal policy has a significant effect on macroeconomic developments in Croatia. Thus, it is a responsibility of fiscal policy makers to prudently use and adjust fiscal instruments in such a way that fiscal policy can always have a counter-cyclical, stabilizing effect on Croatian economy.

New analytical approaches used for a holistic/integral evaluation of the company created value advocate implementation of business models based on Corporate Social Responsibility (CSR) sand the Triple Bottom Line (TBL). Owing to the fact that CSR and TBL are strategically oriented on business objectives of sustainable development, especially in managing eco-efficiency, this type of value is being named – Sustainable Value Added (SVA). However, since previous research and constructive criticism of SVA models have not been adequately tested by applying the appropriate econometric models so far, in this paper author introduces applicable empirical testing of the SVA sensitivity on the Triple Bottom Line aspects: 1) financial, 2) environmental and 3) social business results. The aim of this paper is to conduct research on SVA as an integrative measure for quantitative assessment of company contributions to the long-term sustainable development. The author also advocates an important thesis regarding the extraction of the TBL data, implicating that this process validates only when a relevant number of companies, across different benchmarks, regularly publishes annual CSR reports. Such publishing ensures transparent and unified TBL data essential for SVA analysis. Research methodology rests on the comparison of SVA with a traditional economic measure of Value Added (VA) in terms of their contributions to business sustainability. Empirical testing indicates significant differences between the SVA and VA regarding their financial, environmental and social sustainability effects. Testing empirically confirms SVA as an integrative measure for sustainable business contributions. This ensures the presentation of complete and standardized data of triple results required for SVA analysis. Additional objective in this context was to investigate eco-efficiency of a specific benchmark as a sustainability precondition, measured by using the SVA.

In this paper we investigate firm level activity in Croatian tourism industry. Our analysis is based on the sample of more than 10,000 firms obtained from Bureau van Dijk database for the period 2006-2015. Theoretical basis of our paper is the Gibrat’s law, which states that firm size and growth rate are independent of each other. Within tourism industry, we differentiate between supporting divisions and the main industry division (accommodation industry), and test the Law on firms in supporting divisions using modified hybrid estimator. In that way, we add to the existing field of knowledge in two ways: through analysis and quantification of intra-industry links within the Law’s framework and by employing hybrid estimator originally developed by Mundlak, which is a novelty in this field of research. Although, our findings do not confirm the Law, we are able to discern supporting tourism industry divisions whose growth is highly determined by the growth of accommodation industry.

This paper investigates the effects of the employment rate on economic growth during the transition process. We start with the mainstream growth econometrics approach that controls for convergence and, in order to control for heterogeneity of countries in our sample, we control our estimates for transition-specific indicators such as initial conditions (pre-transition history), governance quality, privatisation methods as well as various indicators of institutional development. We use a wide range of model specifications using fixed effects as well as Bayesian averaging to address the problem of model uncertainty in 24 countries during the 1995-2019 period. Contrary to the neoclassical growth model assumptions, we find that the employment rate is one of the most important growth factors even after three decades. Results also indicate that convergence (initial level of development) robustly explains a part of cross-country growth rate differentials, while the effects of the initial conditions (pre-transition history) are robust, but fade out after the first decade. We do not find evidence that physical capital and population growth explain the growth in our sample.

This paper investigates the effect of the COVID-19 crisis on the relationship between gender diversity in management and supervisory boards and the level of earnings management. The research sample comprised companies listed on the Croatian national stock exchange, and the panel data was obtained for the 2015- 2020 period to estimate regression models. Findings indicated that the presence and higher share of female directors on management boards were beneficial for curtailing earnings management but only for the financial statements disclosed during the first year of the COVID-19 pandemic. At that time, such effort was vital due to the escalation of earnings management caused by extremely pessimistic economic expectations. In the financial statements disclosed during the second year of the pandemic, the level of earnings management considerably declined, and female directors were not as effective in restraining these activities as in the first year. It could imply greater prudence of female directors when anticipating the intensity of public scrutiny regarding financial statements in a period of crisis. Gender diversity in supervisory boards proved to be an insignificant determinant of earnings management during the COVID-19 crisis.

The aim of this paper is to analyze the factors that most influenced consumers in purchasing fashion products and the factors the most important to consumers during the COVID-19 pandemic, as well as whether there are any differences between the period prior to the pandemic and the period after it. The available research on the correlation between the pandemic and consumer buying habits and the factors influencing the purchase of products mainly dealt with consumer goods stimulated by the initial stockpiling of hygiene materials and food, books, recreational equipment, etc. On a purposive sample of 1,002 adult respondents in the territory of Serbia, the quantitative empirical research applying an online survey was conducted within the March-June 2021 period. The SPSS was used for data processing and analysis and for the interpretation of research results. In addition to descriptive statistics (frequency distribution, mean, standard deviation), comparative statistics (χ2-test, ANOVA, t-test) was used as well. The change in the attitude to consumption has led to the introduction of a new value system for consumers when purchasing fashion products. Understanding these factors will help the fashion industry find new approaches to satisfy the changed buying habits of consumers.

With the rapid developments in information technologies in recent years, the Internet has more place in our daily lives, and as a result, the Internet, used as a means of communication at first, has resulted in changes in the shopping preferences of today’s consumers. Online shopping is one of the most drastic of these changes. It is believed that having more information about the reasons for consumer preferences on shopping online or avoiding online shopping and defining the processes related to online shopping conducted by businesses can contribute to the efficiency of online shopping. In the present study, an attitude scale toward online shopping is developed and this scale is tested for validity and reliability. There are various attitude scales toward online shopping in the related literature. The purpose of developing this scale is to define new attitudes of consumers toward online shopping that have adapted to changing conditions of the world and technology. With the opinions of 5 academics in the fields of marketing and business management, the number of items, which was 24 on the draft scale, was reduced to 20. For the pre-study, data were collected from 60 consumers and analyzed. A pilot study of the draft scale was conducted on 154 consumers. At the end of this study, a scale consisting of 2 dimensions and 14 items with high validity and reliability was developed. Obtained findings are presented in detail in the paper.

This study examines the industry-specific effects of productivity shocks on exports and the internationalisation of the largest Croatian exporters. In order to answer two research questions: (1) Which hypothesis, the productivity-led hypothesis or export-led hypothesis, holds in the case of the largest Croatian exporters? (2) Are the effects of productivity shocks on exports and internationalization sectoral dependent, and in what way? The authors tested 300 largest exporters’ micro- financial data for the 2006-2015 period by using a vector autoregression (VAR) method. Three productivity measures examined are total factor productivity, labour productivity and capital productivity. The results imply that productivity-led hypothesis holds for majority of Croatian largest exporters’ sectors. Rather than a specific export-led hypothesis, a bi-directional flow has proved to have greater influence on several industrial sectors, including professional and scientific services and administrative services sectors, and to a lesser extent, transport and warehousing, accommodation and food sectors. It is predominantly negative in terms of TFP and positive in terms of labour productivity (agriculture, electricity and gas supply, wholesale and transport and warehousing, and information and communication) and capital productivity (electricity and gas supply). Managerial and policy implications of productivity shocks are discussed in the paper.

This paper examines the relationship between digitalization and sustainable development and presents the composite index used for measuring the digital competitiveness of nations – the Digital Economy and Society Index (DESI). Today’s environment is highly dependent on technological capabilities. Tracking contemporary technological development is becoming crucial at both micro and macro level. One of the major revolutions in modern business is switching from traditional to digital business models for achieving higher competitiveness level. Digitalization is one of the primary impetus of today’s development. To accept and implement these changes, it is important to highlight the macromarketing role in this process. It is necessary to have concrete measures for identifying the shortcomings, good practices, and track the development. For this purpose, European Commission developed DESI to measure digital performance of European Union countries. This paper examines the DESI methodology and observes how the digital performance of EU affects main sustainable development components: economic, social, and environmental. Thus, the paper explores the correlations of DESI and other composite indices that measure sustainability components. Besides, the research examined the relationships between Hofstede’s cultural dimensions and digital performance. The paper highlights the importance of digitalization as another crucial component of society’s sustainable development.

The purpose of the paper is to provide the ranking of Central and Eastern European cities, based on various elements of cities’ smart performance. Our analysis enables the evaluation of social, economic and environmental aspects of urban life that represent the determinants of cities’ competitive profiles and consequently, the positions on the ranking lists. The research is based on the data on perceptions of citizens on different aspects of urban quality, provided by the Eurostat’s Urban Audit Perception Survey. For the assessment of various hierarchically structured indicators of cities’ smart performance, a multi-criteria analysis model is developed, combining the AHP (Analytic Hierarchy Process) for determining the relative importance of criteria and TOPSIS (Technique for Order Preference by Similarity to Ideal Solution) method of ranking. The main finding of the paper implies that direct perceptions of citizens on the overall life satisfaction in the analyzed European cities are not influenced by their smart performance. The comparison of ranks obtained by the constructed multi-criteria model and perceived satisfaction of life indicates a rather weak relation.

The aim of this research is to examine whether and to what extent the process of financialization has an impact on the process of deindustrialization in the European Union, employing a fixed-effect panel regression model. In this paper exogenous explanatory variable that indicates the level of financialization is presented by the value added of the finance sector as a percentage of total value added, and by the employment in the finance sector as a percentage of total employment. In a process of deindustrialization, the industrial activity is usually replaced by service activities. However, situations where the service sector has not been able to absorb the additional supply of labour and to produce additional values that would compensate the reduction in the industrial sector, could have led to higher unemployment and lower economic growth. In this paper, deindustrialization is measured by the value added of industry sector as a percentage of total value added, and by the employment in industry as a percentage of total employment. Using latest panel data from EUROSTAT and ILO for the period from 1995 to 2015 author detects the significant and negative impacts of the process of financialization on value added of industry sector, as well as on the employment in the industry sector. This supports the conclusion that the process of deindustrialization of the EU countries can be characterized as a financializationled process.

The aim of this paper is to evaluate how well-prepared the Western Balkans (Albania, Macedonia, Montenegro and Serbia) are to join the EU in terms of competitiveness and to clearly identify the set of EU countries that would represent a ‘real benchmark’ when trying to assess the region’s competitiveness. In 2010, the Europe 2020 strategy was proposed as a means of focusing the EU and its Member States on the main task of improving competitiveness and creating conditions for smart, sustainable and inclusive growth. As candidate countries for EU membership, Western Balkans are expected to act in accordance with these goals. Hence, this paper implements the Global Competitiveness Index 2015-2016 and a set of supplemental data analysis tools to assess both the level of competitiveness and the region’s relative position vis-à-vis the EU member states. The results clearly show that the EU is far from a homogenous entity in terms of competitiveness, whilst the candidates expose a competitiveness profile similar to that of Central and Eastern Europe. Overall, the Western Balkans trail behind the EU-28 countries in building a knowledge-intensive economy and are significantly outdistanced in laying the foundations for ‘smart growth’, as the European economies press ahead.

Competitiveness represents a concept that has occupied a great deal of the economic theorists’ attention for decades. Due to its complexity and different perceptions, it has not been uniquely defined yet and neither has its measurement system been completely developed. The problem of the conducted research arises from the fact that the countries mostly due to structural and other constraints in the economy (or in cases where they have high levels of GDP) do not use the available inputs in the best way, i.e. they do not achieve a satisfactory level of economic efficiency, which is then reflected on the competitiveness of their economies. The aim of the research paper is to demonstrate how a combination of using Data Envelopment Analysis Method (DEA) and the Global Competitiveness Index (GCI) in ranking the countries according to the macroeconomic competitiveness is more realistic than it is in the case of using the traditional indicators. In the paper, in evaluating the competitiveness of selected EU Member States the Data Envelopment Analysis Method (DEA) is used. Based on the previous researches and our research results it is found that the traditional indicators of competitiveness are incomplete because they do not consider the macroeconomic efficiency of the country. Therefore, we propose to apply a combination of GCI and the efficiency results obtained by DEA in order to achieve a more realistic evaluation of macroeconomic competitiveness. As a key outcome of the research, the new measure of competitiveness is proposed: a combination of traditional competitiveness indicator and the results of the evaluation of countries’ macroeconomic efficiency obtained by applying BCC model of DEA method.

This paper aims to assess the possibility of predicting Croatian recessionary episodes using probit models. The authors first estimate a baseline static model using four leading indicators of recession (monetary base, unemployment, industrial production, and CROBEX stock market index). Lag lengths of up to 6 months are examined for each of the observed variables in the probit specification, and several important conclusions arise from the estimated models. First, the stock market and money supply exhibit the most pronounced leading characteristics in the Croatian economy (a 3-month lag length is selected by the information criteria). Second, the dynamic model (including a lagged dependent dummy variable) significantly outperforms the baseline static model. Third, the authors augment the probit model by the Economic Sentiment Indicator, which significantly contributes to the model accuracy. The latter confirms the main hypothesis of the paper, going in line with the assertion that psychological factors largely govern the economic cycles, growing in significance in times of economic hardship.

The goal of this paper is to determine the impact of transition on the total factor productivity (TFP) in Croatia. Hypothesis of our paper is that transition had a positive impact on the growth rate of TFP and its share in the GDP growth. We employ growth accounting methodology to estimate TFP and structural break tests to estimate total number and location(s) of structural break(s) in the estimated TFP series. In order to test for the robustness of our results we combine different sets of assumptions and derive 18 different TFP series. The fundamental results of the paper imply that transition had a positive effect on the TFP growth rate, but it did not have statistically significant effect on the relative importance (share) of TFP in GDP growth rate. Structural break tests have indicated two statistically significant break locations in the TFP growth rate data. The first break in 1979 is closely connected with overall slowdown of growth, while the second break location in 1993 can be attributed to the transition reforms. Estimated locations of the structural breaks are robust over all 18 estimated TFP series. The basic conclusion from this research is that transition reforms have managed to spark the growth of the overall economy as well as TFP, but the relative importance of the TFP vis a vis other growth factors such as human or physical capital did not significantly change.

The goal of this investigation is to research the development of intensive and extensive trade margins on product-country level data for Croatia during the period 2000–2012. Hypothesis of our paper is that RTAs-induced trade liberalization will have heterogeneous effects on particular product groups with indirect implications on national welfare. Static and dynamic gravity trade models are used on panel data accounting for over 90% of total trade during the observed period. Estimations of the trade gravity model and trade margins showed that while SAA and CEFTA arrangements positively affected different measures of intensive and extensive trade margins, specially exports and imports of consumption products, effects on trade in intermediate and capital goods were relatively subdued. This suggests a tendency for market-seeking rather than efficiency-seeking behaviour of Croatia’s trade sector. When comparing the results for two trade agreements using dynamic model, we find that SAA primarily affected trade in consumption goods while effects of CEFTA are more evenly dispersed across different product groups. Main conclusion of the paper is that Croatia’s policy makers should try to keep the preferential status of Croatia within the CEFTA market in the medium term, focusing on the Croatian economy.

The purpose of this paper is to research the effect of abandoning the assumption of long-term time horizon in terms of reliability of the Global Competitiveness Report (GCR) findings. In order to achieve this goal we will compare the GCR findings with the findings of a composite index of competitiveness, named 6 BIC (Basic Indicators of Competitiveness). We have developed this index on the theoretical basis provided by Krugman, Fagerbergs, Scott, Lodge, Aiginger and others. Economists are aware that any theoretical conception, including the GCR, relies on a number of assumptions and postulations. If some of those have been under scrutiny, then the whole construction and its findings would lose their credibility. One of the most significant assumptions rooted in the Global Competitiveness Report is its longevity. In the long-term, the change in productivity level through price competitiveness certainly brings out a change in outcome competitiveness level. However, the effects in short-to-middle term are not certain. Our findings show that there is a whole range of countries whose national competitiveness is either under-estimated by the GCR (for example Russia, Turkey, Estonia, Moldova) or overvalued (Finland, Ireland, Iceland, Portugal, Spain) in short-to-middle term. The basic conclusion from the obtained results of the research is that the GCR does not provide sufficiently good view of the current competitiveness of the countries, and that this indicator needs to be extended also with other competitiveness indicators, such as those selected in our paper

This paper aims to estimate the impact of ICT and technological development of countries on supply chain trade. As proxy measures of supply chain trade, the author applies domestic value added (DVAFX) included in gross-foreign exports, and foreign-value added included in domestic exports (FVA) from the Eora MRIO database while constructing the ICT variable by using confirmatory factor analysis. Furthermore, as a proxy variable for the country’s technological development, the author applies the economic complexity index developed by Harvard’s Growth Lab, conducting her analysis based on the structural gravity model estimated with the Poisson Pseudo-Maximum Likelihood Estimator (PPML). Together with the standard gravity regressors, the model includes the bilateral position of countries in the supply chain. Our panel dataset covers the 2000-2019 period, including 130 world countries. To control for the potential source of endogeneity, the model includes reporter and partner country fixed effects, yearly fixed effects, and country-pair fixed effects. The results confirm a statistically significant relationship between the country’s technological development and supply-chain trade. Technological development enables a country to produce more complex, higher value-added products and thus to be more upstream positioned in the supply chain. The more upstream the country is in the supply chain, the higher the domestic value added is included in its exports.

Emigration flows and their relations with economic development can be observed through different aspects, where one of the important questions is the role of the remittances, and transfer of foreign money to home countries. The objective of this study is to investigate the impact of remittances on economic development in Central and Eastern European countries. A review of previous research on the role of emigration and the impact of remittances on economic development is presented in the first part of the paper. This is followed by panel data analysis. The analysis covers the period after the enlargement of the European Union (EU) in 2004 till the nowadays. The results confirm the positive and statistically significant influence of personal remittances on the economic development of the new EU member states, as well as the positive and statistically significant influence of final consumption, gross fixed capital formation, external trade balance, and foreign direct investments. The positive influence of remittances on economic development should be observed with caution, regarding that remittances are the results of emigration and also are connected with the unfavourable effects of emigration. This study adds to previous research about the significance of remittances in the economies of the new EU member states.

Since economic theory identifies new enterprises as one of the basic drivers of economic growth, it brings to the forefront the need to understand the existing dynamics of entrepreneurship. Consequently, the identification of the basic entrepreneurship’s determinants is a central issue from both a theoretical and a practical point of view in contemporary literature. A better understanding of the factors influencing the dynamics of entrepreneurship is a basic precondition for creating effective policies aimed at encouraging the creation of new companies, and consequently, the creation of new jobs. Therefore, this paper addresses several important issues. From the theoretical standpoint, the role of entrepreneurial determinants in creating a new business is examined. From a practical standpoint, the basic formal institutional factors influencing the birth rate of new companies are analyzed. The analysis was conducted on a sample of European Union countries for the period from 2010 to 2019 using data from the World Bank’s Doing Business database, as well as data on business dynamics from the Eurostat database. A panel data regression analysis using the fixed-effects estimation procedure with Driscoll-Kraay standard errors was conducted, and the results indicate that the dynamics of new enterprises’ foundation are negatively affected by the total tax burden, as well as the cost of property registration, while the amount of initial capital required to open a business has a positive impact. The results of the research can serve as a basis for fine-tuning policies that will facilitate and encourage the creation of new enterprises.

This paper investigates the role of personality traits in nurturing entrepreneurial intention in South Korea and Vietnam. We developed a research model to examine the integrated influence of both positive entrepreneurial characteristics and dark triad on entrepreneurial intention in South Korea and Vietnam. Primary data was collected from 550 students in South Korea and 700 students in Vietnam using the convenient sampling method in a self-administered questionnaire survey. We used structural equation modelling (SEM) to analyse structural relationships between positive entrepreneurial attributes, dark triads, and entrepreneurial intention in two samples. T-tests were also performed to explore any differences in students’ entrepreneurial intention in South Korea and Vietnam regarding their family background and gender. Findings showed that positive entrepreneurial attributes and dark triads influence entrepreneurial intention differently in the two countries. While the dark triad mainly influenced Vietnamese students’ intention to startup, Korean students received more impact from the positive entrepreneurial characteristics such as risk tolerance, locus of control, and entrepreneurial alertness. Surprisingly, both gender and family tradition do not affect students’ entrepreneurial intention. Based on our findings, we suggested that policymakers and higher education institutions in both South Korea and Vietnam promote students’ entrepreneurial intentions in the future.

This paper aims to assess the impact of financial factors on the dividend payout ratio, and the purpose is to research factors affecting dividend payout in less developed markets and compare them with the results of previous studies. We use the global research platform Screener.co, and the financial statements available on Zagreb Stock Exchange to collect the data. Our sample consists of companies listed on the Zagreb Stock Exchange that paid dividends at least once in the last three years. In the model applied, we covered five years (dividends paid from 2017 to 2021, based on financial fundamentals preceding dividends from 2016 to 2020) using hierarchical linear regression analysis that consists of four explanatory variables: return on equity, return on assets, financial leverage, and free cash flow to revenue. First, the research found high fluctuations in the dividend payout ratio and return on equity variability. Secondly, we found no statistically significant causality between the dividend payout ratio and explanatory variables. The results suggest that other long-term non-financial factors, such as the investors’ expectations, history of paying dividends, and large cash reserves backed by high retained earnings, may have a decisive impact on the dividend payout ratio rather than recent financial factors.

The paper explores the mismatch between the skills and qualifications required by the labour market and those acquired through education and on-the-job learning. The skill mismatch in transition economies tends to be even more pronounced as the labour markets in these countries are characterized by structural unemployment, affecting both older workers with obsolete skills and the young ones. Employers face poor incentives for investing in workforce skill development, due to the inadequate investment climate and volatile business environment. Transition countries face increasing outward mobility of an educated workforce, loss of human capital, and shortage of workforce in the fields such as ICT, medicine, science and research. The research is based on empirical data generated in a survey on ICT and manufacturing enterprises in the City of Niš, Serbia. The research methodology combines workers' self-assessment method for the skill gap measurement and the competence approach combined with the statistical methods. The findings indicate the presence of a qualification mismatch, in the form of the over-qualification as a dominant irregularity in the analysed labour market. The results of the study are expected to contribute to creating a network of policy instrumentaria that tend to be effective on a sub-national level in addressing the mismatch.

Croatian banking sector amounts to the majority of its financial sector. Therefore, it is necessary that Croatian banks operate efficiently. In the past two decades, the Croatian banking sector went through a consolidation process that steadily decreased the number of banks and allocated the majority of assets and market share to a few large banks. A simple definition of efficiency is cost minimization and profit maximization. Therefore, a bank is efficient when it strives to minimize its costs while maximizing its profits. This paper aims to estimate efficiency of Croatian banks using the DEA methodology within the period 2014-2019. In addition, the performance indicators (return on assets, return on equity) calculated for the same period aim at comparing performance indicators to efficiency results. The results indicate that larger banks are generally more efficient in operating on the frontier. And, in comparison to performance indicators, they achieve higher levels of returns on assets and equity. Furthermore, some small banks tend to be efficient, while the benefits of being a medium bank are inconclusive since the results reveal that some medium banks have below average efficiency. Overall, average efficiency improved in the observed period, which means that the consolidation process of financial institutions creates large and efficient banks.