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Terms-of-Trade Shocks and Slovak Economy


  • Martin Lukáčik

    () (University of Economics in Bratislava)

  • Karol Szomolányi

    () (University of Economics in Bratislava)

  • Adriana Lukáčiková

    () (University of Economics in Bratislava)


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 and that the terms-of-trade shocks explain only a small fraction of business cycles in the Slovak economy. We use quarterly data in constant prices in the period 1997-2014. The results are in line with the theoretical and empirical studies in the contemporary world economic literature. The negative relationship between the terms-of-trade and the trade balance confirms a theoretical Obstfeld-Svensson-Razin effect. The positive effect of a change in the terms-of-trade on the trade balance - so called Harberger-Laursen-Metzler effect - is the smaller, the more persistent terms-of-trade shocks are. By capital adjustment costs, the theoretical effect may be even negative. A modest contribution of the terms-of-trade shocks to the business-cycle fluctuations in Slovakia is in line with other empirical papers around the world.

Suggested Citation

  • Martin Lukáčik & Karol Szomolányi & Adriana Lukáčiková, 2016. "Terms-of-Trade Shocks and Slovak Economy," Acta Universitatis Bohemiae Meridionales, University of South Bohemia in Ceske Budejovice, vol. 19(1), pages 10-19.
  • Handle: RePEc:boh:actaub:v:19:y:2016:i:1:p:10-19

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    Terms of Trade; Business Cycle; Slovak Economy; Trade Balance;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade


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