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Lessons from the czech and slovak economies split

Author

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  • Růžena Vintrová

Abstract

The less developed Slovak economy was converging quickly to the Czech economic level after the World War II, thanks to the massive reallocation of resources. The inflow amounted to 11% of the Slovak GDP, the outflow from the Czech Lands represented 4% of their GDP. The Slovak GDP per capita reached around three quarters of the Czech one in 1992. After the split of Czechoslovakia, the economic policy adjusted to the changed conditions by sinking real wages and depreciation of Slovak koruna, so that the Slovak ULC are the lowest among the Central European countries now. The cost competitiveness, accompanied by an abundant inflow of FDI and economic reforms after the EU accession helped to speed the real convergence. As a result, the Slovak GDP per capita reached 84% of the Czech one in 2007. The balance of costs and benefits of the euro adoption varies due to different conditions in the succession states and to a certain extent justifies the more rapid advancement to the single currency in Slovakia. The common challenge for both economies is to overcome the one-sided orientation on cost/price competitiveness based on low wages.

Suggested Citation

  • Růžena Vintrová, 2009. "Lessons from the czech and slovak economies split," Prague Economic Papers, Prague University of Economics and Business, vol. 2009(1), pages 3-25.
    • Handle: RePEc:prg:jnlpep:v:2009:y:2009:i:1:id:338:p:3-25
    DOI: 10.18267/j.pep.338
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    References listed on IDEAS

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    1. Vasily Astrov & Vladimir Gligorov & Peter Havlik & Mario Holzner & Gabor Hunya & Sebastian Leitner & Zdenek Lukas & Anton Mihailov & Olga Pindyuk & Leon Podkaminer & Josef Pöschl & Waltraut Urban & He, 2008. "The Big Boom Is Over, but Growth Remains Strong and Inflation Calms Down," wiiw Forecast Reports 2, The Vienna Institute for International Economic Studies, wiiw.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Scotland is not Slovakia
      by Brian Ashcroft in Scottish Economy Watch on 2012-11-29 07:17:46

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    Cited by:

    1. Kant, Chander, 2018. "Privatization and growth: natural experiment of European economies in transition," MPRA Paper 96080, University Library of Munich, Germany, revised 28 Sep 2019.

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    More about this item

    Keywords

    regional reallocation of resources; real and nominal convergence; real gross domestic income; price and wage level convergence; costs and benefits of euro adoption;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F15 - International Economics - - Trade - - - Economic Integration
    • 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

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