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Transition Economy Convergence in a Two-Country Model

Author

Listed:
  • 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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    Cited by:

    1. repec:wsr:wpaper:y:2008:i:018 is not listed on IDEAS
    2. Michal Rubaszek, 2009. "Economic convergence and the fundamental equilibrium exchange rate in Poland," Bank i Kredyt, Narodowy Bank Polski, vol. 40(1), pages 7-22.
    3. 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.
    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 (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 2, pages 1-19.
    5. Lombardo, Giovanni & Vestin, David, 2008. "Welfare implications of Calvo vs. Rotemberg-pricing assumptions," Economics Letters, Elsevier, vol. 100(2), pages 275-279, August.
    6. 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.
    7. repec:cnb:ocpubv:rb06/2 is not listed on IDEAS
    8. Brůha, Jan & Podpiera, Jiří, 2007. "Inquiries on dynamics of transition economy convergence in a two-country model," Working Paper Series 791, European Central Bank.
    9. International Monetary Fund, 2007. "Euro Area Policies: Selected Issues," IMF Staff Country Reports 2007/259, International Monetary Fund.
    10. 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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