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The convergence dynamics of a transition economy: The case of the Czech Republic

Listed author(s):
  • Bruha, Jan
  • Podpiera, Jirí
  • Polák, Stanislav

In this paper we develop a two-country dynamic general equilibrium model by means of which we seek to explain the long-run path of a transition economy. The model's novel feature is the inclusion of quality investment in the standard framework of applied general equilibrium two-country models. This feature is necessary to explain the trend in the real exchange rate. We present an application to the Czech economy.

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File URL: http://www.sciencedirect.com/science/article/pii/S0264-9993(09)00139-4
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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 27 (2010)
Issue (Month): 1 (January)
Pages: 116-124

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Handle: RePEc:eee:ecmode:v:27:y:2010:i:1:p:116-124
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  1. Kanda Naknoi, 2005. "Real exchange rate fluctuations, endogenous tradability and exchange rate regime," International Finance 0509004, EconWPA, revised 07 Nov 2005.
  2. Stephanie Schmitt-Grohe & Martin Uribe, 2001. "Closing Small Open Economy Models," Departmental Working Papers 200115, Rutgers University, Department of Economics.
  3. Ian Babetskii & Balazs Egert, 2005. "Equilibrium Exchange Rate in the Czech Republic: How Good is the Czech BEER?," CERGE-EI Working Papers wp267, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
  4. Fabio Ghironi & Marc J. Melitz, 2004. "International Trade and Macroeconomic Dynamics with Heterogeneous Firms," Boston College Working Papers in Economics 599, Boston College Department of Economics.
  5. Sachs, Jeffrey D, 1996. "The Transition at Mid Decade," American Economic Review, American Economic Association, vol. 86(2), pages 128-133, May.
  6. Martin Cincibuch & Jiří Podpiera, 2006. "Beyond Balassa-Samuelson: Real appreciation in tradables in transition countries," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 14(3), pages 547-573, 07.
  7. Maurice Obstfeld and Kenneth Rogoff., 1995. "Exchange Rate Dynamics Redux," Center for International and Development Economics Research (CIDER) Working Papers C95-048, University of California at Berkeley.
  8. Jiri Popiera & Jan Bruha, 2007. "Inquiries on Dynamics of Transition Economy Convergence in a Two-Country Model," 2007 Meeting Papers 587, Society for Economic Dynamics.
  9. Peter Blair Henry, 2003. "Capital Account Liberalization, The Cost of Capital, and Economic Growth," NBER Working Papers 9488, National Bureau of Economic Research, Inc.
  10. Gilli, Manfred & Pauletto, Giorgio, 1998. "Krylov methods for solving models with forward-looking variables," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1275-1289, August.
  11. Jan Bruha & Jiri Podpiera, 2006. "Transition Economy Convergence in a Two-Country Model," Computing in Economics and Finance 2006 154, Society for Computational Economics.
  12. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  13. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
  14. Henning Ahnert & Geoff Kenny, 2004. "Quality adjustment of European price statistics and the role for hedonics," Occasional Paper Series 15, European Central Bank.
  15. Kanda Naknoi & Michael Kumhof & Douglas Laxton, 2005. "On the Benefits of Exchange Rate Flexibility under Endogenous Tradedness of Goods," Computing in Economics and Finance 2005 405, Society for Computational Economics.
  16. Boucekkine, Raouf, 1995. "An alternative methodology for solving nonlinear forward-looking models," Journal of Economic Dynamics and Control, Elsevier, vol. 19(4), pages 711-734, May.
  17. Judd, Kenneth L., 2002. "The parametric path method: an alternative to Fair-Taylor and L-B-J for solving perfect foresight models," Journal of Economic Dynamics and Control, Elsevier, vol. 26(9-10), pages 1557-1583, August.
  18. Jiøí Podpiera & Marie Raková, 2008. "Competition and Relative Prices when the Exchange Rate Changes: Evidence from Exporting Companies," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 58(01-02), pages 38-56, January.
  19. Juillard, Michel & Laxton, Douglas & McAdam, Peter & Pioro, Hope, 1998. "An algorithm competition: First-order iterations versus Newton-based techniques," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1291-1318, August.
  20. Jiri Podpiera & Marie Rakova, 2006. "Degree of Competition and Export-Production Relative Prices when the Exchange Rate Changes: Evidence from a Panel of Czech Exporting Companies," Working Papers 2006/10, Czech National Bank, Research Department.
  21. Dan Ben-David, 1993. "Equalizing Exchange: Trade Liberalization and Income Convergence," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 653-679.
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