socio 2.pdf - ISSN 2071-789X 36 RECENT ISSUES IN ECONOMIC DEVELOPMENT Hana Fitzov� Libor Žídek Fitzov� H Žídek L(2015 Impact of Trade on Economic

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

This preview shows page 1 - 2 out of 15 pages.

Hana Fitzová, Libor ŽídekISSN 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 REPUBLICSE-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.2015/8-2/4JEL 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.
Background image
Image of page 2

You've reached the end of your free preview.

Want to read all 15 pages?

  • Summer '19

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture