socio 2.pdf - ISSN 2071-789X 36 RECENT ISSUES IN ECONOMIC...

Hana Fitzová , Libor Žídek ISSN 2071-789X
RECENT ISSUES IN ECONOMIC DEVELOPMENT
Economics & Sociology, Vol. 8, No 2, 2015
36
Hana Fitzová ,
Faculty of Economics and
Administration,
Masaryk University,
Brno, Czech Republic,
IMPACT OF TRADE ON ECONOMIC
GROWTH IN THE CZECH
AND SLOVAK REPUBLICS
E-mail: [email protected]
Libor Žídek ,
Faculty of Economics and
Administration,
Masaryk University,
Brno, Czech Republic,
E-mail: [email protected]
ABSTRACT. This paper examines the relationship
between trade and economic growth in the Czech and
Slovak Republics. The situation after the Velvet revolution
in 1989 is discussed at first. The change of the structure of
the trade and the orientation of the trade in both republics
are explained and illustrated on available data.
The empirical part proved an analysis of the relationship
between trade and GDP growth, using econometric
analysis. Theory of cointegration, the vector error
correction model and Granger causalities are employed. A
long-term equilibrium among the investigated variables is
identified in both countries. The empirical findings also
indicate important role of exports in the economic growth
in both republics. We conclude that economic growth in
both of the countries can be identified as export-led.
Received : April, 2015
1st Revision : June, 2015
Accepted : July, 2015
DOI: 10.14254/2071-
789X.2015/8-2/4
JEL Classification : F15, C32 Keywords : Czech and Slovak trade, export-led growth,
cointegration, VAR model.
Introduction
The size and orientation of Czechoslovak trade before 1989 was a consequence of the
economic system used at that time. The economy was generally closed and eastward
orientated and economic trade was planned just like all the other parts of the economy. One of
the key aspects of economic transformation after 1990 was quick (and brave) opening of the
domestic market to international competition. At the same time, trade with Eastern markets
sharply declined and the weight of the trade shifted towards western markets. Integration into
the world economy dramatically increased in the following years and the Czech and Slovak
economies became one of the most open in the world. The overall shape of trade experienced
a fundamental change.
The goal of this article is to determine the impact of trade on economic growth in both
of the countries (the Czech Republic and the Slovak Republic). Economic theory generally
considers export led growth as one of the growth strategies. We will try to prove whether or
not the Czech and Slovak Republics can be regarded as examples of this form of growth.
An econometric analysis (cointegration, the vector error correction model and Granger
causalities) is used to find out whether a long-run equilibrium between trade (exports and
imports) and domestic economic growth exists. The direction of causalities between the
variables is also examined. Quarterly data from 1996 to 2014 for the Czech Republic and
Fitzová, H. , Žídek, L. (2015), Impact of Trade on Economic Growth in the
Czech and Slovak Republics, Economics and Sociology , Vol. 8, No 2, pp. 36-50.