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Convergence and Distortions: the Czech Republic, Hungary and Poland between 1996–2009

  • István Kónya

    ()

    (Magyar Nemzeti Bank (central bank of Hungary))

The paper interprets the growth and convergence experience of three Central-Eastern European economies (the Czech Republic, Hungary, and Poland) through the lens of the stochastic neoclassical growth model. It adapts the methodology of Business Cycle Accounting (Chari, Kehoe and McGrattan 2007) to economies on a transition path. The paper uses the method to uncover distortions (‘wedges’) on the labor and capital markets, and then presents various comparisons and counterfactuals based on them. Results show that (i) capital and labor market distortions vary across the three economies, but they are well within the range of advanced economies; (ii) the Polish and Hungarian labor wedges are high, and the Czech labor wedge increases; (iii) the evolution of Hungarian wedges followed a different path than the evolution of Polish and Czech wedges, and (iv) realistic reductions in the capital and labor wedges would lead to significant output gains for Hungary and Poland.

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File URL: http://english.mnb.hu/Root/Dokumentumtar/ENMNB/Kiadvanyok/mnben_mnbfuzetek/WP_2011_06.pdf
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Paper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Working Papers with number 2011/6.

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Length: 32 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:mnb:wpaper:2011/6
Contact details of provider: Web page: http://www.mnb.hu/

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  1. Angus Deaton & Alan Heston, 2008. "Understanding PPPs and PPP-based national accounts," Working Papers 1120, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
  2. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2007. "Business Cycle Accounting," Econometrica, Econometric Society, vol. 75(3), pages 781-836, 05.
  3. Keiichiro Kobayashi & Masaru Inaba, 2006. "Business cycle accounting for the Japanese economy," 2006 Meeting Papers 313, Society for Economic Dynamics.
  4. Bart Hobijn & Aysegül Sahin, 2007. "Job-finding and separation rates in the OECD," Staff Reports 298, Federal Reserve Bank of New York.
  5. Erwin Diewert, 2010. "Understanding PPPs and PPP-Based National Accounts: Comment," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 36-45, October.
  6. Ricardo Reis & Vasco Curdia, 2009. "Correlated Disturbances and U.S. Business Cycles," 2009 Meeting Papers 129, Society for Economic Dynamics.
  7. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2007. "Comparing alternative representations and alternative methodologies in business cycle accounting," Staff Report 384, Federal Reserve Bank of Minneapolis.
  8. Lawrence J. Christiano & Joshua M. Davis, 2006. "Two Flaws In Business Cycle Accounting," NBER Working Papers 12647, National Bureau of Economic Research, Inc.
  9. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
  10. Martin Ravallion, 2010. "Understanding PPPs and PPP-Based National Accounts: Comment," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 46-52, October.
  11. Erasmus Kristoffer Kersting, 2008. "The 1980s Recession in the UK: A Business Cycle Accounting Perspective," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 179-191, January.
  12. Keisuke Otsu, 2007. "A Neoclassical Analysis of the Asian Crisis: Business Cycle Accounting of a Small Open Economy," IMES Discussion Paper Series 07-E-16, Institute for Monetary and Economic Studies, Bank of Japan.
  13. John Bailey Jones & Sohini Sahu, 2008. "Transition Accounting for India in a Multi-Sector Dynamic General Equilibrium Model," Discussion Papers 08-03, University at Albany, SUNY, Department of Economics.
  14. Bäurle, Gregor & Burren, Daniel, 2011. "Business cycle accounting with model consistent expectations," Economics Letters, Elsevier, vol. 110(1), pages 18-19, January.
  15. Mary O'Mahony & Marcel P. Timmer, 2009. "Output, Input and Productivity Measures at the Industry Level: The EU KLEMS Database," Economic Journal, Royal Economic Society, vol. 119(538), pages F374-F403, 06.
  16. Tiago Cavalcanti, 2007. "Business cycle and level accounting: the case of Portugal," Portuguese Economic Journal, Springer, vol. 6(1), pages 47-64, April.
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