O11 - Macroeconomic Analyses of Economic DevelopmentReturn

The paper analyses some aspects of EU-China trade relations. Correlation analysis was applied to quantify the extent of the influence of the foreign trade with China on the overall foreign trade of the five members of the EU that have the largest foreign trade with China. Given the ongoing trade deficits of the EU with China, we decided to apply the Trade Complementarity Index (TCI) to determine the extent of their trade complementarity. Our initial hypothesis that the economies are highly complementary was rejected. We thus decided to apply the TCI to the EU's trade relations with the US. For the US, the TCI confirmed the existence of high trade complementarity. This implies that the EU can strengthen its negotiating power with China by increasing its trade diversification. These conclusions were also supported by our econometric model. A thorough analysis of EU-China trade relations also revealed the growth potential of the trade in services, which is gaining its momentum given the turbulences in global trade. The paper suggests that the EU needs to strengthen its trade relations with its "natural trade partners" instead of concentrating on China. The paper's focus on trade in services is a major contribution as it has so far been neglected in the economic literature.

The purpose of this study is to investigate whether financial markets contribute to the eco-nomy when needed. The quantile regression model and causality in variance tests are applied to monthly data from December 1989 to July 2016 for 19 OECD economies. The results confirm that the response of capital markets to economic growth depends more on the state of the economy than the state of the country's development. Generally, interaction between financial markets and the economy is weak in OECD countries except Japan and Estonia.

This paper examines the effect of schooling on economic growth. It tests the link between schooling and economic growth using the system GMM estimation for a panel of 86 countries in the years 1960-2005. Affirming the results of the previous literature the positive impact of schooling on growth has been confirmed. The paper presents two main findings. First, additional year of schooling contributes positively to per capita output growth. Secondly, high percentage share of population with no formal education results in economic growth slowdown.

This paper suggests that real GDP is not an appropriate indicator for long-term comparisons of the performance of transformation and post-transformation economies either with developed economies, or one with another, or across different phases of development of a single economy. We analyse the possible reasons why real GDP diverges from the theoretical concept of the objective level of value added adjusted for inflation. These reasons concern real exchange rate appreciation and overestimation of inflation due to quality changes in output after the collapse of central planning. To overcome the shortcomings of real GDP in explaining the true "transformation story" we develop the concept of "comparable" real GDP. This concept is calculated from nominal GDP, the exchange rate against the euro, and inflation in the euro area. While the differences between "standard" real GDP and "comparable" real GDP are modest and temporary in advanced economies, they are quantitatively and qualitatively significant and persistent in transformation and post-transformation economies. On the basis of the relevant literature we introduce two modifications of "comparable" real GDP. They account for likely differences in productivity patterns between tradables and non-tradables and between the performance of the export and non-export segments of the economy respectively. We conclude that true convergence is proceeding at a significantly higher pace than real GDP implies and that the Czech economy is converging to the euro area somewhat faster than the Polish economy and much faster than the Hungarian economy.

The less developed Slovak economy was converging quickly to the Czech economic level after the World War II, thanks to the massive reallocation of resources. The inflow amounted to 11% of the Slovak GDP, the outflow from the Czech Lands represented 4% of their GDP. The Slovak GDP per capita reached around three quarters of the Czech one in 1992. After the split of Czechoslovakia, the economic policy adjusted to the changed conditions by sinking real wages and depreciation of Slovak koruna, so that the Slovak ULC are the lowest among the Central European countries now. The cost competitiveness, accompanied by an abundant inflow of FDI and economic reforms after the EU accession helped to speed the real convergence. As a result, the Slovak GDP per capita reached 84% of the Czech one in 2007. The balance of costs and benefits of the euro adoption varies due to different conditions in the succession states and to a certain extent justifies the more rapid advancement to the single currency in Slovakia. The common challenge for both economies is to overcome the one-sided orientation on cost/price competitiveness based on low wages.

The article analyses the process of nominal convergence of the new EU member states (NMS) with particular attention paid to some applied and theoretical aspects, which may have impact on the process of the euro adoption. Chapter two addresses selected theoretical and methodological issues connected with the International Comparison Project (ICP). It discusses determinants and influences affecting price level convergence and some issues that have set off new trends, such as the globalization or process of the on-going European integration. This chapter also presents a brief summary of the main trends of price convergence observed by focusing on changes of comparative price levels (CPL) for various disaggregated items of GDP. It also deals with potential issues and problems arising in this context. Chapter three is aimed at an empirical verification of price convergence and at a search for main driving factors using data for the NMS and the old EU member states over 11 years (1995-2006). There are some differences in results depending on the applied econometric method. The most important determinants of price level are GDP and population, the openness and public finance's indicators are not significant. The last section summarises the main findings.

This paper presents the analysis of unconditional b and s convergence among the ten European countries that accessed the European Union in 2004. Unconditional b convergence means that the less developed countries (with lower GDP per capita) grow faster than the more developed countries (with higher GDP per capita). s convergence exists when income differentiation among economies decreases over time. Our results confirm the existence of both types of convergence in the second half of the 1990s and the 2000s. The poorer New EU Member States grew generally faster than the richer New EU Member States. As a result, the income gap among these countries has decreased (although it still remains quite large). The convergence occurred at the rate of 2.87% in the years 1995-2006 and 3.23% in 1996-2006. This result is very similar to the results of other analyses on the subject.

In this paper, we apply the aggregate production function to approximate the path of potential output and decompose it into its determinants. Based on the decomposition we evaluate the supply side performance from a macroeconomic perspective. We use a time-varying NAIRU to derive the amount of potential labour and a newly developed measure of capital services to account for the productive impact of capital. In addition, trend total factor productivity is estimated. During 1995-2000, the growth in potential output was constrained by a gradual increase in the NAIRU, a temporary drop in investment activity and, most importantly, by only a modest rise in total factor productivity. For the period 2001-2005, we observe substantial improvements in the supply-side performance, except for the functioning of the labour market.

This paper analyses the process of nominal and real convergence of the new Member States of the European Union. It also discusses theoretical and methodological issues relating to this process. The importance of nominal and real convergence is underlined in connection with a successful catching-up. The EU-10 economies experienced robust economic growth in recent years, which had a positive impact on the convergence process. Although this favourable development of real convergence (GDP per capita in PPS) is accompanied by a simultaneous price (nominal) convergence (changes in relative prices and a convergence of price levels), the comparative price level is still biased towards lower level in comparison with the per capita income.

This article aims at investigating the nature of the causal relationship between immigration and economic development measured by GDP per capita in Norway using Granger causality test. The results on the unit root test indicate that all the series are non-stationary and are in I(1) process. The Johansen cointegration test reveals that there is no cointegration among the data sets. The Granger causality test shows that when the level of immigration increases, GDP per capita also increases. It has also been found that immigration has no impact on unemployment, and vice versa.

In 2004, the Czech economy continued in solid growth. Slight acceleration of economic growth was driven in particular by strong investment demand and improving performance of the foreign trade with goods. On the other hand, due to slowdown in real wages, consumer demand weakened. 2004 was the year of turnover in foreign trade which has reported the best results since 1994. The EU entry was an important factor behind the improvement of trade balance - the foreign trade exchange significantly accelerated after the EU accession. The EU entry opened new chances to the exporters, especially small and medium-sized companies could fully use the advantage of the Single Market. With the trade balance improving, the reason for permanently high current account deficit is the growing deficit of income balance as a consequence of strong FDI inflow. January and May changes in the Value Added Tax brought a temporary speed-up of consumer prices. After the absorption of this increase, since the last quarter of 2004, headline inflation has been declining. Similar to previous years, inflation fell under the CNB target corridor. Record high world prices of oil and metals caused a strong increase of industrial producer prices, however, strong competition between both producers and traders has prevented the spillover to consumer prices.

In 2003, the economic growth moderately accelerated. The main factor of this acceleration was massive household consumption accompanied by the revival of fixed capital formation. Gradual narrowing of the gap between consumer and investment demand was one of major achievements of 2003, supporting the long-term sustainability of Czech economic growth. In 2003, both imports and exports accelerated, the trade deficit remaining at the same level as in 2002. Considering acceleration of Czech economic growth in 2003, stagnating level of trade deficit is favourable. The reason for continuously high current account deficit is growing deficit of income balance and declining surplus of service balance. The deficit of the current account in the last two years was not provoked by growing imports (as in the nineties), but has been predominantly the price for the massive foreign direct investment inflows in the past decade.

Long-term growth convergence has extensively been investigated based on economic variables. Indicators of social development and health status are generally focused on their contribution to growth or on assessing national health care systems. Yet, as a general yardstick of well-being, life expectancy should be regarded as a criterion to measure crosscountry development patterns over long periods. Following a review of two approaches to estimating convergence, hypotheses and findings of recent studies on public health and growth are examined. Reformulating the analytical framework of both strands of research, discrete choice and parametric and semi-parametric Poisson regressions are applied to a three-decade panel of 132 countries. Determinants of achievements tend to impact differently across countries, with this distinction occurring particularly between negative and positive counts. Indications of convergence are tempered by results accounting for possible non-linear relationships, which further highlight the discrepancy between country groups with average life expectancy losses and gains.

Gross domestic product continued to grow in 2002, faster than in the economies of most of the Czech Republic's major partners, albeit at a slower pace than in 2001. The major driving force of economic growth was private consumption, followed by government consumption. Investment demand registered a slowdown as an indirect result of weak foreign demand. 2002 was the year of record-low inflation in the history of the Czech Republic - at the end of the year, the consumer price index stood at 0.6 %. During 2002, nominal appreciation of the Czech currency accelerated - the koruna appreciated against the euro by almost ten per cent. The labor market was severely hit by the general economic slowdown and the unemployment rate anew reached the record-high level at the end of the year.

This paper is aimed at addressing general characteristics of growth and development that concerns all transition countries before their accession to the EU when their convergence to the EU average gross domestic product (GDP) per capita is expected. By looking back at the GDP statistics of major industrial countries for the last 90 years, a question is posed why some countries get on a path of a fast growth while some others go from one secular crisis to another. In assessing the policies supporting growth it is concluded that conditions on the company and industry level are more important than national macroeconomic policies.

The article analyses the economic development of transition economies (the CR, Hungary, Poland, Slovakia and Slovenia) in the nineties by means of the original graphical method based on a multidimensional view, with the intention to assess convergence or divergence of their economic level vis-a-vis the average level of the EU countries. The polydimensional aspect is based in the first step on four basic objectives of economic policy depicted by the macroeconomic (magic) tetragon. In the second step, an each quadrant of the magic tetragon is extended by six detailed indicators to get a multidimensional convergence polygon. The polygon framework allowed carrying out more detailed analysis of the convergence process. The detailed results of the multidimensional convergence analysis varied across individual countries and over time; the time path of these differences partly reflected the uneven progress in macroeconomic stabilization and recovery of economic growth.

This paper evaluates Czech economic development during 2001 and is supplemented by the predictions of basic economic indicators for 2002 and 2003. This article is divided in several parts. In the beginning we focus on economic growth, including a marginal analysis of GDP and industrial production. It is possible to find a detailed net inflation analysis in Chapter three which consists of an explanation of current demand and supply factors and then we present an econometric estimate of the net inflation equation. This chapter includes impulse-response analysis. Raw material dependency and the intensity of Czech production is analyzed in Chapter four, including an econometric estimate of oil and gas prices. In the following chapter - Labour Market - we focus on gross nominal wage determinants in the Czech Republic. In the last two chapters we evaluate fiscal and monetary policy, including an detailed interest rate analysis.

The aim and probably the biggest contribution of this paper is to produce unique data series for the capital stock and an estimate of the depreciation rate (using microeconomic data) in the transitive economies in the period 1989 - 1999 and subsequently to try to calculate the growth accounting formula. The countries of primary interest are the Czech Republic and Slovakia, where the most complete data sources are available. The paper will prove that in the first years of economic transition Central and Eastern European countries show extremely high dynamics of growth that can be attributed to increases in productivity, that is very high Solow residual.

Domestic demand, especially private household consumption and fixed capital investment was the main engine of continuing economic growth. At the same time, strong domestic demand did not provoke regular inflationary pressures. Inflation has stopped to be a threat of macroeconomic stability since the last quarter of 2001. Therefore, the Czech monetary policy could follow the overall world trend in basic rate cuts, the appreciating Czech currency being, however, very reluctant to monetary policy steps. The slowdown in Western Europe was felt predominantly in the Czech industry, which was very sensitive especially to the decline of demand for Czech industrial exports to Germany. The scope of external imbalance was approximately the same as in previous year - low level of import prices helped to offset the negative impact of weakening foreign demand. The current account deficit was comfortably offset by ongoing inflow of FDI.