Explanation of Economic Growth Differences in the CEE Countries: Importance of the BOP Constraint
AbstractThis paper presents a balance-of-payments (BOP) constrained growth analysis of the long-run growth process in the Central and Eastern European (CEE) countries during the recovery period of transition (1995-2004). The paper tests the BOP-constrained growth model, based on the specification of a dynamic import function, which describes the short-term and long-term import behaviour in a different way. McCombie and Thirlwall have implicitly argued for a similar specification of the import function in the analyses of this kind. Econometrically, the import function is formulated, in this article, as a conditional Error Correction Model (ECM). It is shown that even the basic BOP-constrained growth model captures well the disparity of growth rates of the gross domestic product (GDP) in the CEE countries. Furthermore, the use of this approach does not point to any 'puzzles of the Baltic growth' that were observed in the analysis by Campos and Kinoshita (2002) based on the supply side model which included the transition-specific variables
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Bibliographic InfoArticle provided by Baltic International Centre for Economic Policy Studies in its journal Baltic Journal of Economics.
Volume (Year): 5 (2005)
Issue (Month): 2 (July)
economic growth; balance-of-payments constraint; Thirlwall's law; import function; error correction model;
Find related papers by JEL classification:
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
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