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IS THERE ANY RELATIONSHIP BETWEEN PRODUCER PRICE INDEX AND CONSUMER PRICE INDEX IN SLOVAKIA? A BOOTSTRAP ROLLING APPROACH

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Su C.-W., Khan K., Lobont O.-R., Sung H.-C.
Ekonomický časopis (Journal of Economics)
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2016
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vol. 64
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issue 7
611 – 628
EN
This study examines the causal link between the producer price index (PPI) and the consumer price index (CPI) in Slovakia. We use the bootstrap Granger full sample causality, and the sub-sample rolling window approach and results indicate the unidirectional causality running from the PPI to the CPI. By taking the structural changes into consideration, the full sample causal relationship is unstable and such results are misappropriated. Further, we use a time-varying rolling window approach to revisit the dynamic causal relationship between the PPI and the CPI. It indicates the existence of bi-directional causality between the two series in several sub-samples and the result supports the neoclassical profit-maximizing model, which shows that PPI plays a key role in the CPI in the Slovakia. We find that the PPI has a more contributing role to the CPI so the central bank can minimise the inflation by taking certain predictive measures to keep the input prices under control. The central bank should consider the reliable response of the prices at an aggregated and disaggregated level of production in the formulation of inflation targeting.
2

CAN FOREIGN DIRECT INVESTMENT PROMOTE EXPORTS IN SLOVAKIA?

100%
Li Z.-Z., Su C.-W., Tao R., Lobont O.-R.
Ekonomický časopis (Journal of Economics)
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2019
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vol. 67
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issue 2
135 – 156
EN
In this paper, we investigate whether the knowledge capital model (Carr Markusen and Maskus, 2001) is satisfied in Slovakia by applying the bootstrap rolling window subsample test to examine the causal relationship between foreign direct investment (FDI) and exports (EX). This method provides more accurate evidence of a connection between these two variables considering structural changes. The empirical results show a positive correlation between FDI and EX and support the vertical FDI in the knowledge capital model in most sample periods. When FDI rises, EX will increase accordingly and vice versa. In addition, FDI exerted a negative effect on EX in 2011, which is attributable to the relative state of the situation at home and abroad. The findings illustrate that FDI and EX benefit from the free economic institution reforms and inexpensive resources. Therefore, the Slovakian government should improve tax reforms and maintain the stability of legislation to achieve mutual promotion between FDI and EX.
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