Net Exports of the European Post-Transition Countries: The Dynamic Factor Approach

Abstract

The paper brings the common and unobserved factor of net exports of the six European post-transition countries, namely Czech Republic, Slovakia, Slovenia, Hungary, Latvia and Romania. The data sample consists of the quarterly net exports time series for the period 1996q1 – 2017q2. The results out of the dynamic factor analysis (DFA) revealed that one hidden random walk explains 53.17% of temporal variation in net exports of the observed sample countries. The relationship between unobserved hidden factor and net exports of Czech Republic, Slovakia, Slovenia and Hungary is found to be positive while the Romanian net export was negatively affected. However, the unobserved factor identified in this paper cannot explain the net export in case of Latvia.