Influence of the Government Final Consumption Expenditure and the Final Consumption Expenditure of Households and NPISH on Economic Growth in Republic of Croatia – VAR Model

The Gross domestic product is one of the main indicators of economic growth. According to the expenditure approach, components of the Gross domestic product are the final consumption expenditure, the gross capital formation, the exports of goods and services and the imports of goods and services. The final consumption consists of the government final consumption expenditure and the final consumption expenditure of households and and non-profit institutions serving households (NPISH) expenditure. Since the final consumption expenditure has significant influence on the Gross domestic product of Republic of Croatia, it is important to investigate relationship between government final consumption expenditure, the final consumption expenditure of households and NPISH and economic growth in Republic of Croatia. This study empirically investigates the dynamic relationships between the government final consumption expenditure, the final consumption expenditure of households and NPISH and the gross domestic product in Republic of Croatia. Quarterly data for the government final consumption expenditure, the final consumption expenditure of households and NPISH and the gross domestic product from 2000 to 2017 are analysed using unrestricted vector autoregressive (VAR) model.