IDEAS home Printed from https://ideas.repec.org/a/bla/manchs/v89y2021i3p239-258.html
   My bibliography  Save this article

Convergence stories of post‐socialist Central‐Eastern European countries

Author

Listed:
  • Dániel Baksa
  • István Kónya

Abstract

This paper views the growth and convergence process of five Central‐Eastern European economies between 1996 and 2019—the Czech Republic, Hungary, Poland, Slovenia and Slovakia—through the lens of an open economy, stochastic neoclassical growth model with simple financial frictions. Our main question is whether shocks to the growth rate of productivity (‘trend’) or shocks to the external interest premium are more important to understand the volatility of GDP growth and its components. We find that while GDP growth fluctuations can be traced back to productivity shocks, the composition of GDP—and consumption in particular—was driven particularly by premium shocks. Investment‐specific and labor market shocks are also important. Our panel estimation allows us to separate global and local components for the productivity‐trend and interest premium shocks. Results indicate that the global trend component is well approximated by the growth rate of the advanced European Union economies, and we also find tentative evidence that recent investment behavior is driven to a large extent by European Union funds.

Suggested Citation

  • Dániel Baksa & István Kónya, 2021. "Convergence stories of post‐socialist Central‐Eastern European countries," Manchester School, University of Manchester, vol. 89(3), pages 239-258, June.
  • Handle: RePEc:bla:manchs:v:89:y:2021:i:3:p:239-258
    DOI: 10.1111/manc.12360
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/manc.12360
    Download Restriction: no

    File URL: https://libkey.io/10.1111/manc.12360?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Sumru Altug & Serdar Kabaca, 2017. "Search Frictions, Financial Frictions, and Labor Market Fluctuations in Emerging Markets," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(1), pages 128-149, January.
    2. Guerron-Quintana, Pablo A., 2013. "Common and idiosyncratic disturbances in developed small open economies," Journal of International Economics, Elsevier, vol. 90(1), pages 33-49.
    3. Canova, Fabio & Sala, Luca, 2009. "Back to square one: Identification issues in DSGE models," Journal of Monetary Economics, Elsevier, vol. 56(4), pages 431-449, May.
    4. Sungbae An & Frank Schorfheide, 2007. "Bayesian Analysis of DSGE Models—Rejoinder," Econometric Reviews, Taylor & Francis Journals, vol. 26(2-4), pages 211-219.
    5. Schmitt-Grohe, Stephanie & Uribe, Martin, 2003. "Closing small open economy models," Journal of International Economics, Elsevier, vol. 61(1), pages 163-185, October.
    6. Olivier Blanchard & Jordi Galí, 2010. "Labor Markets and Monetary Policy: A New Keynesian Model with Unemployment," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 1-30, April.
    7. Jan Babecký & Philip Du Caju & Theodora Kosma & Martina Lawless & Julián Messina & Tairi Rõõm, 2010. "Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(4), pages 884-910, December.
    8. Mark Aguiar & Gita Gopinath, 2007. "Emerging Market Business Cycles: The Cycle Is the Trend," Journal of Political Economy, University of Chicago Press, vol. 115(1), pages 69-102.
    9. Javier Garcia-Cicco & Roberto Pancrazi & Martin Uribe, 2010. "Real Business Cycles in Emerging Countries?," American Economic Review, American Economic Association, vol. 100(5), pages 2510-2531, December.
    10. Erceg, Christopher J. & Henderson, Dale W. & Levin, Andrew T., 2000. "Optimal monetary policy with staggered wage and price contracts," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 281-313, October.
    11. Galí, Jordi, 2010. "Monetary Policy and Unemployment," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 10, pages 487-546, Elsevier.
    12. Olivei, Giovanni & Tenreyro, Silvana, 2010. "Wage-setting patterns and monetary policy: International evidence," Journal of Monetary Economics, Elsevier, vol. 57(7), pages 785-802, October.
    13. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 1-45, February.
    14. Minetti, Raoul & Peng, Tao, 2013. "Lending constraints, real estate prices and business cycles in emerging economies," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2397-2416.
    15. Neumeyer, Pablo A. & Perri, Fabrizio, 2005. "Business cycles in emerging economies: the role of interest rates," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 345-380, March.
    16. Taştan, Hüseyin, 2013. "Real business cycles in emerging economies: Turkish case," Economic Modelling, Elsevier, vol. 34(C), pages 106-113.
    17. Naoussi, Claude Francis & Tripier, Fabien, 2013. "Trend shocks and economic development," Journal of Development Economics, Elsevier, vol. 103(C), pages 29-42.
    18. Zhao, Yan, 2013. "Borrowing constraints and the trade balance–output comovement," Economic Modelling, Elsevier, vol. 32(C), pages 34-41.
    19. Christiano, Lawrence J. & Trabandt, Mathias & Walentin, Karl, 2010. "DSGE Models for Monetary Policy Analysis," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 7, pages 285-367, Elsevier.
    20. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-417, June.
    21. Sungbae An & Frank Schorfheide, 2007. "Bayesian Analysis of DSGE Models," Econometric Reviews, Taylor & Francis Journals, vol. 26(2-4), pages 113-172.
    22. Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sector Level," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 820-835, October.
    23. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, September.
    24. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
    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. Estefanía Mourelle & Juan Carlos Cuestas, 2022. "Investment dynamics in Central and Eastern Europe: Why doesn’t the sun always rise from the east?," Working Papers 2022/02, Economics Department, Universitat Jaume I, Castellón (Spain).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kónya, István & Baksa, Dániel, 2017. "Növekedés és pénzügyi környezet [Growth and the financial environment]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 349-376.
    2. Andrei Polbin & Sergey Drobyshevsky, 2014. "Developing a Dynamic Stochastic Model of General Equilibrium for the Russian Economy," Research Paper Series, Gaidar Institute for Economic Policy, issue 166P, pages 156-156.
    3. Pham, Binh Thai & Sala, Hector & Silva, José I., 2020. "Growth and real business cycles in Vietnam and the Asean-5. Does the trend shock matter?," Economic Systems, Elsevier, vol. 44(1).
    4. Van Nguyen, Phuong, 2020. "The Vietnamese business cycle in an estimated small open economy New Keynesian DSGE model," Dynare Working Papers 56, CEPREMAP.
    5. Phuong V. Nguyen, 2020. "The Vietnamese business cycle in an estimated small open economy New Keynesian DSGE model," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 48(5), pages 1035-1063, October.
    6. D. Siena, 2014. "The European Monetary Union and Imbalances: Is it an Anticipation Story ?," Working papers 501, Banque de France.
    7. Richard H. Clarida & Ildikó Magyari, 2016. "International Financial Adjustment in a Canonical Open Economy Growth Model," NBER Working Papers 22758, National Bureau of Economic Research, Inc.
    8. Sergio Ocampo Diaz, 2013. "Rule-of-Thumb Consumers, Nominal Rigidities and the Design of Interest Rate Rules," Research Department Publications IDB-WP-400, Inter-American Development Bank, Research Department.
    9. Daniel Baksa & Istvan Konya, 2017. "Interest premium and economic growth: the case of CEE," CERS-IE WORKING PAPERS 1712, Institute of Economics, Centre for Economic and Regional Studies.
    10. Daoju Peng & Kang Shi & Juanyi Xu & Yue Zhou, 2020. "SOE and Chinese Real Business Cycle," Annals of Economics and Finance, Society for AEF, vol. 21(2), pages 415-469, November.
    11. Kawther Alimi & Mohamed Chakroun, 2022. "Wage Rigidity Impacts on Unemployment and Inflation Persistence in Tunisia: Evidence from an Estimated DSGE Model," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(1), pages 474-500, March.
    12. Daoju Peng & Kang ShiAuthor-Workplace-Name: Chinese University of Hong Kong & Juanyi XuAuthor-Workplace-Name: Hong Kong University of Science and Technology, 2016. "SOE and Chinese Real Business Cycle," Working Papers 022016, Hong Kong Institute for Monetary Research.
    13. Pablo Burriel & Jesús Fernández-Villaverde & Juan Rubio-Ramírez, 2010. "MEDEA: a DSGE model for the Spanish economy," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 1(1), pages 175-243, March.
    14. Lawrence Christiano & Mathias Trabandt & Karl Walentin, 2021. "Involuntary Unemployment and the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 39, pages 26-54, January.
    15. Guerron-Quintana, Pablo A., 2013. "Common and idiosyncratic disturbances in developed small open economies," Journal of International Economics, Elsevier, vol. 90(1), pages 33-49.
    16. Miyamoto, Wataru & Nguyen, Thuy Lan, 2017. "Understanding the cross-country effects of U.S. technology shocks," Journal of International Economics, Elsevier, vol. 106(C), pages 143-164.
    17. Hashmat Khan & John Tsoukalas, 2012. "The Quantitative Importance of News Shocks in Estimated DSGE Models," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(8), pages 1535-1561, December.
    18. Khan, Hashmat & Tsoukalas, John, 2011. "Investment shocks and the comovement problem," Journal of Economic Dynamics and Control, Elsevier, vol. 35(1), pages 115-130, January.
    19. Hüseyin Taştan & Bekir Aşık, 2014. "A Bayesian Estimation of Real Business-Cycle Models for the Turkish Economy," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 3(2), pages 27-50, May.
    20. Tae Bong Kim & Hangyu Lee, 2016. "Macroeconomic Shocks and Dynamics of Labor Markets in Korea," Korean Economic Review, Korean Economic Association, vol. 32, pages 101-136.

    More about this item

    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:bla:manchs:v:89:y:2021:i:3:p:239-258. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/semanuk.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.