Financial eurization in Croatia and its (non)linear pattern behaviour

• Main Author: Mile Bošnjak
• Format: Article
• Language: English
• Published: Croatian Operational Research Society 2018-01-01
• Series: Croatian Operational Research Review
• Online Access: http://hrcak.srce.hr/file/300103

The phenomenon of financial eurization is prominent in the region of south eastern European countries. This paper examines the phenomenon in Croatia focusing on the liability side of the banking system. Using monthly data from January 1997 to November 2015 univariate time series models are estimated and evaluated. Following research results in this paper nonlinear model specifications outperform ARMA(3,0,0) in explaining financial eurization pattern behavior in Croatia. The research results revealed nonlinear and threshold dependent dynamics of eurization dynamics in Croatia. Empirical evidence out of this paper points out on persistent eurization with hysteresis indicating the need to achieve overall macroeconomic stability in order to resolve the existing phenomenon of financial eurization in Croatia.