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Estimate of the Elasticity of Substitution in Slovak Economy ? A Frequency Filter SUR Model

Author

Listed:
  • Karol Szomolányi

    (University of Economics in Bratislava)

  • Martin Luká?ik

    (University of Economics in Bratislava)

  • Adriana Luká?iková

    (University of Economics in Bratislava)

Abstract

The elasticity of substitution between capital and labor in Slovak economy is estimated in the paper. To avoid normalization of the constant elasticity substitution production function problem, we focus in the capital and labor demand specification. Data series of capital, labor, output and their prices gathered from the National Bank of Slovakia macroeconomic database are used. To abstract from the business cycle shocks, data are modified by frequency filters. Finally, to avoid a false regression, the specifications are differenced. Since we do not reject the correlation between error terms of the specification, we use the seemingly unrelated regression method to estimate the coefficients. In result the estimated elasticity of substitution in the Slovak economy is relatively small; its value ranges from 0.03 to 0.11.

Suggested Citation

  • Karol Szomolányi & Martin Luká?ik & Adriana Luká?iková, 2018. "Estimate of the Elasticity of Substitution in Slovak Economy ? A Frequency Filter SUR Model," Proceedings of Economics and Finance Conferences 6910155, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iefpro:6910155
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    File URL: https://iises.net/proceedings/10th-economics-finance-conference-rome/table-of-content/detail?cid=69&iid=035&rid=10155
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    More about this item

    Keywords

    elasticity of the input substitution; seemingly unrelated regression model; frequency filter;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

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