IDEAS home Printed from https://ideas.repec.org/a/bic/journl/v5y2005i2p48-65.html
   My bibliography  Save this article

Explanation of Economic Growth Differences in the CEE Countries: Importance of the BOP Constraint

Author

Listed:
  • Virmantas Kvedaras

    () (Vilnius Management College, Vilnius University)

Abstract

This 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

Suggested Citation

  • Virmantas Kvedaras, 2005. "Explanation of Economic Growth Differences in the CEE Countries: Importance of the BOP Constraint," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 5(2), pages 48-65, July.
  • Handle: RePEc:bic:journl:v:5:y:2005:i:2:p:48-65
    as

    Download full text from publisher

    File URL: http://biceps.org/assets/docs/bje/EU%20BJE%205.2_.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. A. P. Thirlwall, 1997. "Reflections on the Concept of Balance-Of-Payments–Constrained Growth," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 19(3), pages 377-385, March.
    2. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," IMF Working Papers 00/30, International Monetary Fund.
    3. Oleh Havrylyshyn & Ron van Rooden, 2003. "Institutions Matter in Transition, But So Do Policies," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 45(1), pages 2-24, March.
    4. Campos, Nauro F & Kinoshita, Yuko, 2002. "Foreign Direct Investment as Technology Transferred: Some Panel Evidence from the Transition Economies," Manchester School, University of Manchester, vol. 70(3), pages 398-419, June.
    5. Jeremy Berkowitz & Lutz Kilian, 2000. "Recent developments in bootstrapping time series," Econometric Reviews, Taylor & Francis Journals, vol. 19(1), pages 1-48.
    6. Nauro F. Campos & Abrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 793-836, September.
    7. Martin Wagner & Jaroslava Hlouskova, 2005. "CEEC growth projections: Certainly necessary and necessarily uncertain," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(2), pages 341-372, April.
    8. Mantalos, Panagiotis & Shukur, Ghazi, 1998. "Size and Power of the Error Correction Model Cointegration Test. A Bootstrap Approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 60(2), pages 249-255, May.
    9. Tondl, Gabriele & Vuksic, Goran, 2003. "What makes regions in Eastern Europe catching up? The role of foreign investment, human resources and geography," ZEI Working Papers B 12-2003, University of Bonn, ZEI - Center for European Integration Studies.
    10. Stanley Fischer & Ratna Sahay, 2000. "The Transition Economies After Ten Years," NBER Working Papers 7664, National Bureau of Economic Research, Inc.
    11. Herwartz, Helmut & Neumann, Michael H., 2005. "Bootstrap inference in systems of single equation error correction models," Journal of Econometrics, Elsevier, vol. 128(1), pages 165-193, September.
    12. Uwe Hassler & Jürgen Wolters, 2006. "Autoregressive distributed lag models and cointegration," AStA Advances in Statistical Analysis, Springer;German Statistical Society, vol. 90(1), pages 59-74, March.
    13. Ertugrul Deliktas & Mehmet Balcilar, 2005. "A Comparative Analysis of Productivity Growth, Catch-Up, and Convergence in Transition Economies," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(1), pages 6-28, January.
    14. Gerrard, W J & Godfrey, L G, 1998. "Diagnostic Checks for Single-Equation Error-Correction and Autoregressive Distributed Lag Models," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(2), pages 222-237, March.
    15. Neil R. Ericsson & James G. MacKinnon, 2002. "Distributions of error correction tests for cointegration," Econometrics Journal, Royal Economic Society, vol. 5(2), pages 285-318, June.
    16. P. J. Dawson, 2003. "Financial development and growth in economies in transition," Applied Economics Letters, Taylor & Francis Journals, vol. 10(13), pages 833-836.
    17. Hubert Hieke, 1997. "Balance-Of-Payments–Constrained Growth: A Reconsideration of the Evidence for the U.S. Economy," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 19(3), pages 313-325, March.
    18. Pleskovic, Boris*Aslund, Anders*Bader, William*C, 2002. "Capacity building in economics : education and research in transition economies," Policy Research Working Paper Series 2763, The World Bank.
    19. Jan Svejnar, 2002. "Transition Economies: Performance and Challenges," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 3-28, Winter.
    20. Oleh Havrylyshyn, 2001. "Recovery and Growth in Transition: A Decade of Evidence," IMF Staff Papers, Palgrave Macmillan, vol. 48(4), pages 1-4.
    21. Jonathan Perraton, 2003. "Balance of Payments Constrained Growth and Developing Countries: An examination of Thirlwall's hypothesis," International Review of Applied Economics, Taylor & Francis Journals, vol. 17(1), pages 1-22.
    22. Jani Bekó, 2003. "The validity of the balance-of-payments-constrained growth model for a small economy in transition: the case of Slovenia," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 26(1), pages 69-93.
    23. Erkin I. Bairam, 1997. "Levels of Economic Development and Appropriate Specification of the Harrod Foreign-Trade Multiplier," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 19(3), pages 337-344, March.
    24. Jasminka Sohinger, 2005. "Growth and Convergence in European Transition Economies : The Impact of Foreign Direct Investment," Eastern European Economics, Taylor & Francis Journals, vol. 43(2), pages 73-94, March.
    25. Fischer, Stanley & Sahay, Ratna & Vegh, Carlos A, 1996. "Economies in Transition: The Beginnings of Growth," American Economic Review, American Economic Association, vol. 86(2), pages 229-233, May.
    26. H. Sonmez Atesoglu, 1997. "Balance-Of-Payments–Constrained Growth Model and Its Implications for the United States," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 19(3), pages 327-335, March.
    27. Christian Amplatz, 2003. "The Economic Convergence Performance of Central and Eastern European Countries," Economic Change and Restructuring, Springer, vol. 36(4), pages 273-295, December.
    28. Li, Hongyi & Maddala, G. S., 1997. "Bootstrapping cointegrating regressions," Journal of Econometrics, Elsevier, vol. 80(2), pages 297-318, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anthony P. Thirlwall, 2011. "Balance of payments constrained growth models: history and overview," PSL Quarterly Review, Economia civile, vol. 64(259), pages 307-351.

    More about this item

    Keywords

    economic growth; balance-of-payments constraint; Thirlwall's law; import function; error correction model;

    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, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bic:journl:v:5:y:2005:i:2:p:48-65. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lelde Jakobsone). General contact details of provider: http://edirc.repec.org/data/biceplv.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.