This doctoral dissertation represents a collection of three inter-related scientific papers that investigate the macroeconomic effects of fiscal policy in Croatia. The main goal of this dissertation is to extend the existing empirical literature on the macroeconomic effects of fiscal policy in Croatia in two ways. First, all research questions in this dissertation are contextualized in a small open economy analytical framework. Previous research on the effects of fiscal policy in Croatia has overlooked the importance of the effects of the openness of the economy on the size of fiscal multipliers. Secondly, this dissertation aims to show that calibrated small-scale small open economy New Keynesian dynamic stochastic general equilibrium (DSGE) models could be used for simulations of the effects of fiscal policy in Croatia and contribute to the understanding of various channels and complex relations between fiscal and macroeconomic variables. Empirical results, based on structural vector autoregressive models (SVAR), suggest that the effects of fiscal policy in Croatia are Keynesian in nature. A rise of government consumption has positive effects on GDP, private aggregate demand, private consumption, employment and prices. On the other hand, a rise in net indirect taxes has negative effects on private aggregate demand and private consumption. However, results also suggest that the effectiveness of fiscal policy in Croatia is constrained by the openness of the economy and the level of public debt as both factors reduce the size of fiscal multiplier. Also, increased public consumption deepens the trade deficit, which puts pressure on external imbalances. Thus, in academic and public debates on the role and possibilities of fiscal policy in Croatia, one should always keep in mind that Croatia is a small, open and relatively highly indebted economy. Such characteristics of the economy put notable challenges for fiscal policy makers in Croatia.