Impact of Terms-of-Trade on Business Cycles of Slovakia, Czech Republic and Croatia

Autori

  • Karol Szomolányi University of Economics Bratislava, Slovakia
  • Martin Lukáčik University of Economics Bratislava, Slovakia
  • Adriana Lukáčiková University of Economics Bratislava, Slovakia

Ključne reči:

innovation, terms-of-trade, business cycle, Slovak economy, Czech economy, Croatian economy, trade balance, market

Apstrakt

Different theoretical and empirical studies lead to the different results. Different theories suggest a positive as well as a negative relation between the terms-of-trade and trade balance. The traditional Keynesian Harberger-Laursen-Metzler effect of the terms-of-trade on the trade balance is positive. According to the Obsfeld-Svensson-Razin effect the positive relation between the terms-of-trade and trade balance is the smaller, the higher a persistence of the terms-of-trade shocks is. The empirical studies do not support statistically significant impact of the terms-of-trade on the output in the developing countries. The goal of the paper is to verify an impact of the terms-of-trade on the Slovak Czech and Croatian business cycles and trade balances. Using the structural vector auto-regression analysis of the terms-of-trade, trade balance, output, consumption and investment cyclical components, we show that the relationship between the terms-of-trade and trade-balance is negative in the Slovak and Czech economy. The relationship between the terms-of-trade and trade-balance is statistically insignificant in the Croatian economy. Terms-of-trade shocks explain only small fraction of business cycles in the Slovak, Czech and Croatian economies. Data exhibit Obstfeld-Svensson-Razin effect of the terms-of-trade on the trade balance.

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

Reference

Aguirre, E. (2011), Business Cycles in Emerging Markets and Implications for the Real Ex-change Rate, Ph.D. Dissertation, Columbia University, New York.

Amisano, G., Giannini, C. (1997), Topics in Structural VAR Econometrics, 2nd ed, Springer-Verlag, Berlin.

Broda, C. (2004), “Terms of Trade and Exchange Rate Regimes in Developing Countries”, Journal of International Economics, Vol. 63, No. 1, pp. 31-58.

Harberger, A.C. (1950), “Currency Depreciation, Income, and the Balance of Trade”, Journal of Political Economy, Vol. 58, No. 1, pp. 47-60.

Laursen, S., Metzler L.A. (1950), “Flexible Exchange Rates and the Theory of Employment”, Review of Economics and Statistics, Vol. 32, No. 4, pp. 281-299.

Lütkepohl, H. (2005), New Introduction to Multiple Time Series Analysis, Springer, Berlin.

Svensson, L.E.O., Razin, A. (1983), “The Terms of Trade and the Current Account: The Harberger-Laursen-Metzler Effect”, Journal of Political Economy, Vol. 91, No. 1, pp. 97-125.

Szomolányi, K., Lukáčik, M., Lukáčiková, A. (2013),“Obmedzeniana svetových finančnýchtrhoch a slovenská ekonomika”, in Kolektivautorů (Ed.), INPROFORUM 2013: sborník z mezinárodnívědecké konference, 7.-8.listopadu 2013, Jihočeskáuniverzita v Českých Budějovicích, Ekonomická fakulta,ČeskéBudějovice,pp. 295-299, available at http://ocs.ef.jcu.cz/index.php/inproforum/INP2013/paper/view/277 / (18 March 2016)

Uribe, M., Schmitt-Grohé, S. (2016),“Open Economy Macroeconomics”, available at http://www.columbia.edu/~mu2166/book/ / (18 March 2016)

##submission.downloads##

Objavljeno

2016-10-31

Broj časopisa

Sekcija

Mathematical and Quantitative Methods