Abstract
It is well known that retail trade is one of the most important parts of any economy. Retail trade is also a very important component of GDP, whereby rising retail trade means a growth in consumption and a fall in unemployment. Therefore, policy makers must be able to recognise how changes in economic variables affect changes in retail trade. The main goal of this paper is to analyse the effects of changes in retail prices, net wages and short-term interest rate on nominal retail trade in Croatia using the bounds testing (ARDL) approach for cointegration. The results indicate the existence of a stable cointegration relationship between the variables. In the long-run, an increase in retail prices and short-term interest rate leads to a reduction in nominal retail trade while an increase in net wages boosts an increase in nominal retail trade. In the short-run, a positive change in retail prices has a positive effect on the change in nominal retail trade while positive changes in net wages and short-term interest rate have negative effects on nominal retail trade.
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