SLOVAK ECONOMIC GROWTH AND THE CONSISTENCY OF THE BALANCE-OF-PAYMENTS CONSTRAINT APPROACH

• Authors: Soukiazis Elias , Eva Muchová , Ján Lisý
• Languages of publication: EN

Abstracts

EN

The present study aims at verifying whether the balance-of-payments constrained growth approach is suitable for explaining the Slovak growth performance after 1993. We use Thirlwall’s Law to predict actual growth of the Slovak economy based on the estimation of the income elasticity of demand for imports and exports, respectively. The income elasticity of demand for imports is obtained by employing 2SLS assuming that domestic income is endogenous. It is shown that the Slovak economy grew at a higher rate than the rate consistent with the balance-of-payments equilibrium at the cost of accumulating current account deficits. A sustainable solution should be focused on reducing the income elasticity of the demand for imports and increasing exports growth. In order the country not to fall into a balance-of-payments constrained growth trap policies must be designed to reduce the country´s dependence on imports by producing higher quality tradable goods.

Keywords

EN

BALANCE OF PAYMENTS; EQUILIBRIUM GROWTH RATE; PRICE ELASTICITY; INCOME ELASTICITY; FOREIGN TRADE; 2SLS REGRESSIONS

• Publisher: Institute of Slovak and World Economics and Institute for Forecasting, Slovak Academy of Sciences
• Journal: Ekonomický časopis (Journal of Economics)
• Year: 2013
• Volume: 61
• Issue: 9
• Pages: 879 – 896

Contributors

author

Soukiazis Elias

• University of Coimbra, Faculty of Economics, Av. Dias da Silva, 165, 3004-512 Coimbra, Portugal

author

Eva Muchová

author

Ján Lisý