We examine the development of potential and actual trade in the Czech Republic, Hungary, and Poland, using the gravity model for trade as an analytical device. However, recent literature indicates that the point estimates of the gravity equation for estimating trade potential are highly uncertain. Hence we base our conclusions on the concept of speed of convergence to potential trade. Examining only the dynamics of actual and potential trade is less dependent on the estimation methodology. Using panel error-correction models we find significant convergence to the estimated potential trade. We also give an explanation for the differences in the speed of convergence among the three countries based on the product-structure of exports and the effects of foreign direct investment. The conclusions drawn from our measure of the speed of convergence are robust across diverse estimation methodologies.
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In the loanable funds model, banks are modelled as resource-trading intermediaries that receive deposits of physical resources from savers before lending them to borrowers. In the financing model, banks are modelled as financial intermediaries whose loans are funded by ex-nihilo creation of ledger-entry deposits that facilitate payments among nonbanks. The financing model predicts larger and faster changes in bank lending and greater real effects of financial shocks. Aggregate bank balance sheets exhibit very high volatility, as predicted by financing models. Alternative explanations of volatility in physical savings, net securities purchases or asset valuations have almost no support in the data.
This paper presents a simple macroeconomic model of the oil market. The model incorporates features of oil supply such as depletion, endogenous oil exploration and extraction, as well as features of oil demand such as the secular increase in demand from emerging-market economies, usage efficiency, and endogenous demand responses. The model provides, inter alia, a useful analytical framework to explore the effects of: a change in world GDP growth; a change in the efficiency of oil usage; and a change in the supply of oil. Notwithstanding that shale oil production today is more responsive to prices than conventional oil, our analysis suggests that an era of prolonged low oil prices is likely to be followed by a period where oil prices overshoot their long-term upward trend.
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