engleski

Macroeconomic growth and financial sector in the Republic of Croatia

A number of studies provide evidence that the size of financial sector is associated with macroeconomic growth.This is not only because financial development facilitates investment, which is important source of growth, but it also contributes to more efficient allocation and use of rare capital resources. Concerning these issues, a lot of questions arise, like what is the nature and direction of the relationship between the macroeconomic growth and financial development? Is there a correlation or causality relationship between these two figures? What is the optimal solution towards higher rate of macroeconomic growth: market-based or bank-based financial systems?For many emerging markets and developing countries, for example the Republic of Croatia, emphasis must be placed on improving the functioning of financial sector issues. The structure of the bank based financial sector in the Republic of Croatia is characterised by the growing relevance of the non-deposit financial institutions, especially after the start of the pension reform in 2002. Nevertheless, the banking sector is still dominant and bank loans represent the most important source of exterior financing the economy. The main result of our research will be, among others, that Croatia has to encourage development of financial sector and domestic capital market in order to enhance Croatian economy and to enable the higher rates of macroeconomic growth.

macroeconomic growth; financial sector; financial development; relationship; financial market; Croatia

ISSN 1313-2555, Journal of International Scientific Publications: Economy and Business, Vol. I, str. 196-207