The dynamics of the trade balance and the terms of trade in Central and Eastern European countries

Alexandra Lopes () and Tiago Sequeira

Acta Oeconomica, 2014, vol. 64, issue 1, 51-71

Abstract: In this work, we assess the existence of an S-Curve pattern in 10 Central and Eastern European countries (CEEC-10) for the relation between the trade balance and the terms of trade. Empirical results support the existence of this curve for Slovenia and Hungary. In the case of Bulgaria, the Czech Republic, and Slovakia the pattern is weaker, but it still prevails, as is the case for an aggregate of the 10 transition countries. We then document this property of business cycles in the dynamic general equilibrium trade model of Backus et al. (1994), calibrated specifically to match the CEEC-10 aggregate economy. Results support the existence of an S-Curve, except when technology shocks are absent and domestic and imported goods are perfect substitutes. Since technological shocks are determinant in explaining the S-Curve pattern and transition countries seem to be experiencing some type of technological shocks, it is not likely that this pattern will fade away in the near future and hence it is important for economic policy to be aware of this phenomenon and its consequences for these countries in terms of real convergence and the timing of euro adoption.

Keywords: Central and Eastern European countries; current account dynamics; terms of trade; S-Curve (search for similar items in EconPapers)
JEL-codes: C68 F32 F41 (search for similar items in EconPapers)
Date: 2014
Note: The authors acknowledge the financial support of Fundação para a Ciência e a Tecnologia.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://akademiai.com/content/7t1800641547r20m/fulltext.pdf (application/pdf)
subscription

Related works:
Working Paper: The Dynamics of the Trade Balance and the Terms of Trade in Central and Eastern European Countries (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aka:aoecon:v:64:y:2014:i:1:p:51-71

Ordering information: This journal article can be ordered from
Akadémiai Kiadó Zrt., P. O. Box 245, H-1519 Budapest, Hungary
https://akjournals.com/

Access Statistics for this article

Acta Oeconomica is currently edited by Mihályi, Péter

More articles in Acta Oeconomica from Akadémiai Kiadó, Hungary
Bibliographic data for series maintained by Kriston, Orsolya ().