Determinants of trade balance in Polish and Czech manufacturing sectors

• Authors: Magdalena Olczyk , Aleksandra Kordalska

Abstracts

EN

Research background: A strong industrial base is essential for achieving long-term sustainable economic growth and export competitiveness. In that sense, manufacturing remains a significant contributor to exports in the CEE countries. How-ever, its role and its influence vary between CEE economies and change over time. Purpose of the article: The main objective of this paper is to compare the determinants of the international competitiveness, measured by the net exports of the manufacturing sectors in the Czech and Polish economies, by using the database of 13 manufacturing sub-sectors in 1995-2011. The authors research the question of how much foreign and domestic demand, the level of labour costs, the level of sector innovation intensity, the level of sector openness to foreign markets as well as sectoral labour productivity influence the changes in trade balance. Methods: Our approach is based on employing an error correction model and SUR model to disaggregated sectoral manufacturing data. Findings & Value added: The results of the analysis conducted show substantial differences in the roles particular variables play in explaining the net exports in individual sectors. For the majority of Polish and Czech manufacturing sub-sectors, generation of positive trade balance is determined by relative demand growth. An increasing labour productivity influences heavily a positive trade balance of Polish goods in majority of sub-sectors, however, a key factor in Czech sub-sectors is decreasing unit labour costs. The results of the analysis indicate mostly a greater impact of the researched factors on net exports in long rather than short term and the better capacity of the Czech economy to correct deviations from the equilibrium.

Keywords

EN

CEE economies; trade balance; international competitiveness; manufacturing; error correction model

• Publisher: Instytut Badań Gospodarczych
• Journal: Equilibrium. Quarterly Journal of Economics and Economic Policy
• Year: 2018
• Volume: 13
• Issue: 3
• Pages: 445-466

Dates

published

2018

Contributors

author

Magdalena Olczyk

• Gdańsk University of Technology

author

Aleksandra Kordalska

• Gdańsk University of Technology

References

• Bahmani-Oskooee, M. (1985). Devaluations and the J-curve: some evidence from LDCs. Review of Economics and Statistics, 67(3). doi: 10.2307/1925980.
• Bahmani-Oskooee, M. (1991). Is there a long-run relation between the trade balance and the real effective rate of LDCs. Economics Letters, 36(4). doi: 10.1016/0165-1765(91)90206-Z.
• Bierut, B. K., & Kuziemska-Pawlak, K. (2017). Competitiveness and export performance of CEE countries. Easter European Economics, 55(6). doi: 10.1080/00128775.2017.1382378.
• Breitung, J. (2000). The local power of some unit root tests for panel data. In B. Baltagi (Ed.). Nonstationary panels, panel cointegration, and dynamic panels. Advances in econometrics. Amsterdam: JAI.
• Bustos, P. (2011). Trade liberalization, exports, and technology upgrading: Evidence on the impact of MERCOSUR on Argentinian firms. American Econom-ic Review, 101(1). doi: 10.1257/aer.101.1.304.
• Cieślik, A., Michałek, J. J., & Tovias, A. (2017). The determinants of export performance of firms in selected MENA countries: comparison with CEE countries, Israel and Turkey. Central European Economic Journal, 2(49). doi: 10.1515/ceej-2017-0009.
• Cieślik, A., & Michałek, J.J. (2018). Firm-level determinants of direct and indirect exports: empirical evidence for C.E.E. and M.E.N.A. countries. Economic Research-Ekonomska Istraživanja, 31(1). doi: 10.1080/1331677X.2018. 1436452.
• Deardorff, A. V. (1984). Testing trade theories and predicting trade flows. In R. W. Jones & P. B. Kenen (Eds.). Handbook of international economics. Amsterdam: North-Holland.
• Dixit, A. K., & Stiglitz, J. E. (1977). Monopolistic competition and optimum product diversity. American Economic Review, 67(3).
• EC (2017). European innovation scoreboard 2017. European Commission.
• Engle, R. F., & Granger, C. W. J. (1987). Co-integration and error correction: representation, estimation, and testing. Econometrica, 55(2). doi: 10.2307/1913 236.
• Goldberg, I., Branstetter, L., Goddard, J. G., & Kuriakose, S. (2008). Globalization and technology absorption in Europe and Central Asia: the role of trade, FDI, and cross-border knowledge flows. World Bank Working Paper, 150.
• Golik, M., Grela, M., Humanicki, M., Kitala, M., Michałek, T., Mroczek, W., Mućk, J., & Rzeszutek, E. (2014). Analysis of the economic situation in the countries of Central and Eastern Europe. Narodowy Bank Polski Working Papers,1/14.
• Guarascio, D., Pianta, M., & Bogliacino, F. (2016). Export, R&D and new products. a model and a test on European industries. Journal of Evolutionary Economics, 26(4). doi: 10.1007/s00191-016-0445-9.
• Im, K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115(1). doi: 10.1016/S0304-4076(03)00092-7.
• Kao, C., & Chiang, M. (2000). On the estimation and inference of a cointegrated regression in panel data. In B. Baltagi (Ed.). Nonstationary panels, panel cointegration, and dynamic panels. Advances in econometrics. Amsterdam: JAI.
• Karo, E., & Kattel, R. (2015). Economic development and evolving state capacities in Central and Eastern Europe: can “smart specialization” make a difference?. Journal of Economic Policy Reform, 18(2). doi: 10.1080/17487870.2015. 1009068.
• Lewney, R. (2011). Study on the cost competitiveness of European industry in the globalization era – empirical evidence on the basis of relative unit labour cost at sectoral level. Ecorys Nederland BV.
• Mark, N. C., Ogaki, M., & Sul, D. (2005). Dynamic seemingly unrelated cointegrating regressions. Review of Economic Studies, 72(3). doi: 10.1016/S0304-4076(03)00092-7.
• Melitz, M. J. (2003). The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica, 71(6). doi: 10.1111/1468-0262. 00467.
• Melitz, M. J., & Ottaviano, G. I. P. (2008). Market size, trade and productivity. Review of Economic Studies, 75(1). doi: 10.1111/j.1467-937X .2007.00463.x.
• Pedroni, P. (1999). Critical values for cointegration tests in heterogeneous panels with multiple regressors. Oxford Bulletin of Economics and Statistics, 61(4). doi: 10.1111/1468-0084.61.s1.14.
• Pesaran, M. H. (2007). A simple panel unit root test in the presence of cross section dependence. Journal of Applied Econometrics, 22(2). doi: 10.1002/jae.951.
• Porter, M. E. (1990). The competitive advantage of nations. New York: Macmillan Press.
• Rivera-Batiz, L. A., & Romer, P. M. (1991). International trade with endogenous technological change. European Economic Review, 35(4). doi: 10.1016/0014-2921(91)90048-N.
• Rivera Leon, L., Miedzinski, M., & Reid, A. (2011). Cohesion policy and regional research and innovation potential: an analysis of the effects of structural funds support for research, technological development and innovation 2000–2010. Studies and reports, EUR 24199, European Commission.
• Sharma, K. (2003). Factors determining India's export performance. Journal of Asia Economics, 14(3). doi: 10.1016/S1049-0078(03)00036-8.
• Timmer, M. P., Dietzenbacher, E., Los, B., Stehrer, R., & de Vries, G. J. (2015). An illustrated user guide to the world input–output database: the case of global automotive production. Review of International Economics, 23. doi: 10.1111/roie.12178.
• Turner, A. G., & Golub, S. S. (1997). Towards a system of multilateral unit labor cost-based competitiveness indicators for advanced, developing and transition countries. IMF Working Paper, 97/151.
• Vernon, R. (1966). International investment and international trade in the product cycle. Quarterly Journal of Economics, 80(2). doi: 10.2307/1880689.
• Vrh, N. (2018). What drives the differences in domestic value added in exports between old and new E.U. member states? Economic Research-Ekonomska Istraživanja, 31(1). doi: 10.1080/1331677X.2018. 1438910.
• Wagner, J. (2008). Export entry, export exit and productivity in German manufacturing industries. International Journal of the Economics of Business, 15(2). doi: 10.1080/13571510802134270.
• Westerlund, J. (2007). Testing for error correction in panel data. Oxford Bulletin of Economics and Statistics, 69(6). doi: 10.1111/j.1468-0084. 2007.00477.x.
• Young, A. (1991). Learning by doing and the dynamic effects of international trade. Quarterly Journal of Economics, 106(2). doi: 10.2307/2937942.

Identifiers

DOI

10.24136/eq.2018.022

Biblioteka Nauki

22446541