The dynamics of economic convergence: The role of alternative investment decisions

Jan Bruha and Jiri Podpiera

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Abstract: In this paper we evaluate how various investment decisions explain the macroeconomic dynamics of European transition countries. We introduce quality investment decisions into a model with other two standard investment margins assumed in the advanced trade literature, i.e., investment in new varieties and in export eligibility. We show that the standard investment margins are not sufficient to simultaneously match the dynamics in the macroeconomic variables, especially the export performance and the real exchange rate. In contrast, the extended model with quality investment provides reconciliation.

Keywords: F12; F36; F41; Two-country Modeling; Convergence; Real Exchange Rate (search for similar items in EconPapers)
Date: 2011-05-14
Note: View the original document on HAL open archive server: https://hal.science/hal-00822060
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Citations: View citations in EconPapers (2)

Published in Journal of Economic Dynamics and Control, 2011, 35 (7), pp.1032. ⟨10.1016/j.jedc.2010.12.016⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00822060

DOI: 10.1016/j.jedc.2010.12.016

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