This master’s thesis explores and analyzes the role of the state in the modern economy and the representation of the free market and state interventionism in the modern economy with reference to the Republic of Croatia and comparable transition countries Hungary and the Czech Republic. Most countries today apply a mixed economic system in which the free market and state interventionism coexist. Economic theory is divided into proponents of the free market and proponents of state interventionism who do not deny the market, but believe that only state intervention can make the market fully effective. The main instruments of state interventionism in a market economy are: monetary policy, fiscal policy, and economic regulation. The Republic of Croatia is characterized by the transition from the system of self-governing socialism to the system of mixed economy. At the same time, Croatia mainly applied the neoliberal economic model but completely unadapted to its own economic structure and the neoliberal model was applied inconsistently. In addition to the neoliberal model, the model of state interventionism was used but just like the neoliberal model this model was applied inconsistently and incorrectly. Thus, monetary policy was completely restrictive and fiscal expansionary but instead of development it financed consumption. Instead of stimulating the market, regulation acted as a restrictive and privatization resulted in the creation of croni capitalisam dependent on state and political structures. Unlike the Republic of Croatia, most transition countries have adapted the neoliberal model to their own economy structure and combined it with the correct model of state interventionism and unlike the Republic of Croatia other transition countries have achieved significantly better economic results.