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Transition Economy Convergence in a Two-Country Model

Author

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  • Jan Bruha

    () (External Economics Relations Division Czech National Bank)

  • Jiri Podpiera

    (External Economics Relations Division Czech National Bank)

Abstract

This paper presents the core of a two-country dynamic general equilibrium model of a transition economy. There are two countries in the model: an advanced economy and an emerging economy, which converges to its more advanced counterpart. The model concentrates on modeling goods and capital flows along an equilibrium balanced path of the convergence process. The model incorporates heterogeneous firms and the notion of trade costs and an endogenous ‘tradeness of goods’ in the spirit similar to the recent models of international economics. While almost all of such international-economics models analyze steady-states equilibia of the world of symmetric countries, the contribution of the paper is to develop a simulation model, which would help policymakers in understanding the endogenous changes during transition in trade, external position, and income balances in a consistent dynamic general equilibrium framework of the two-country-world with asymmetric countries

Suggested Citation

  • Jan Bruha & Jiri Podpiera, 2006. "Transition Economy Convergence in a Two-Country Model," Computing in Economics and Finance 2006 154, Society for Computational Economics.
  • Handle: RePEc:sce:scecfa:154
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    Citations

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    Cited by:

    1. Bruha, Jan & Podpiera, Jirí & Polák, Stanislav, 2010. "The convergence dynamics of a transition economy: The case of the Czech Republic," Economic Modelling, Elsevier, vol. 27(1), pages 116-124, January.
    2. Juraj Antal & Frantisek Brazdik & Jan Bruha & Martin Fukac & Adrian Pagan & Jiri Podpiera & Stanislav Polak & Yuliya Rychalovska, 2008. "CNB Economic Research Bulletin: Inflation Targeting and DSGE Models," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 2, volume 6, number rb06/2 edited by Juraj Antal & Jan Babecky.
    3. Brůha, Jan & Podpiera, Jiří, 2007. "Inquiries on dynamics of transition economy convergence in a two-country model," Working Paper Series 791, European Central Bank.
    4. Bogoev, Jane & Bojceva Terzijan, Sultanija & Égert, Balázs & Petrovska, Magdalena, 2008. "Real Exchange Rate Dynamics in Macedonia: Old Wisdoms and New Insights," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 2, pages 1-19.
    5. International Monetary Fund, 2007. "Euro Area Policies; Selected Issues," IMF Staff Country Reports 07/259, International Monetary Fund.
    6. Vestin, David & Lombardo, Giovanni, 2007. "Welfare implications of Calvo vs. Rotemberg pricing assumptions," Working Paper Series 770, European Central Bank.
    7. Manganelli, Simone & Wolswijk, Guido, 2007. "Market discipline, financial integration and fiscal rules: what drives spreads in the euro area government bond market?," Working Paper Series 745, European Central Bank.
    8. Brůha, Jan & Podpiera, Jiří, 2007. "Transition economy convergence in a two-country model: implications for monetary integration," Working Paper Series 740, European Central Bank.

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