| Summary: | The aim of this paper is to evaluate the controversies of fiscal and monetary policies in defining business cycles in Croatia, i.e. to answer the question whether they can, and in what way, determine the cyclical movements. Using Hodrick-Prescott filter for extracting cycles from selected macroeconomic variables for the period 1994-2013, this paper gives a reflection on the past relationship between the characteristics of Croatian fiscal and monetary policies by testing whether these two economic pillars are in fact coordinated over a business cycle. We found that both fiscal and monetary variables exhibit counter-cyclical behaviour with relatively weak correlation to the real GDP suggesting that they are coordinated during a business cycle but their reach is ambiguous. Finally, we conclude that fiscal and monetary policies in Croatia are constrained by internal and external factors, and thus they often cannot accomplish their counter-cyclical role.
|
|---|
