As was first stressed by the classical economists Adam Smith and David Ricardo, international trade plays a crucial role in the growth process. The paper aims to analyze the influence of foreign trade on economic performance in the wood processing industry (WPI) of Czechia and Slovakia. The multivariate regression method (MLR), assumption tests for MLR models, and Granger causality test were applied to identify association between foreign trade economic performance, and indicators were formed to measure the effects of foreign trade at the industry level. The Granger test revealed the unidirectional causality in the Slovak WPI and bidirectional causality in the Czech WPI. The results revealed that the net export growth has a positive effect on the economic performance of the industry, but only if the growth in imports is lower than in exports. The balanced trade balance indicated no influence of foreign trade on economic performance. The paper contributes to existing knowledge with indicators for evaluation of foreign trade effects on the performance of the industry. The paper also brings new empirical knowledge in trade balance effects on the economic performance of industries.
This work is licensed under a Creative Commons Attribution 4.0 International License. The European post-communist countries that have integrated into the European Union are emerging market economies. However, their short-run economic performance does not correspond to the observed business cycles of other global emerging markets. The business cycles of the studied countries are longer, and their recessions are more pronounced. Moreover, economic activity in the studied countries is relatively low and volatile, and the trade balance and government purchases have a relatively significant countercyclical character. These are the core conclusions from our business cycle study of the chosen European post-communist countries. In the study, we use both traditional and contemporary business cycle definitions. Using traditional definitions, we determine the peaks, troughs, expansions and contractions and quantify the durations and amplitudes of their expansions, recessions and business cycles. Using contemporary definitions, we measure cyclical properties by computing the first and second moments of the chosen macroeconomic cyclical components and growth rates. Differences in the business cycles and characteristics between European post-communist countries and other emerging countries are discussed with reference to the works of other authors. The persistency of the data series is measured by the serial correlation coefficient of its cyclical component.
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In our research we estimate the elasticity of substitution post-communist economies integrated in European Union. There are many approaches to estimate the production function coefficients as the elasticity of substitution. We argue that a frequency panel model is suitable econometric tool for our purposes. We derive the specification from the capital demand first-order condition of firm maximising its profit. Data are adapted from the World Penn Tables and World Development Indicators, World Bank. Data are modified with band-pass filter to abstract them from the business cycles and the short-term effects driven by different underlying processes. The filter creates overlapping observations, the stochastic term is serially correlated and therefore feasible generalized least squares estimator is used. Comparing the results with the relevant results in a world literature we estimate relatively low value of the elasticity of substitution in European post-communist countries. Possible explanations are discussed.
The elasticity of substitution between capital and labor in Slovak economy is estimated in the paper. To avoid normalization of the constant elasticity substitution production function problem, we focus in the capital and labor demand specification. Data series of capital, labor, output and their prices gathered from the National Bank of Slovakia macroeconomic database are used. To abstract from the business cycle shocks, data are modified by frequency filters. Finally, to avoid a false regression, the specifications are differenced. Since we do not reject the correlation between error terms of the specification, we use the seemingly unrelated regression method to estimate the coefficients. In result the estimated elasticity of substitution in the Slovak economy is relatively small; its value ranges from 0.03 to 0.11.
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