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Determinants of trade balance in Polish and Czech manufacturing sectors

Author

Listed:
  • Magdalena Olczyk

    (Gdansk University of Technology, Poland)

  • Aleksandra Kordalska

    (Gdansk University of Technology, Poland)

Abstract

Research background: A strong industrial base is essential for achieving long-term sustainable economic growth and export competitiveness. In that sense, manufacturing remains a significant contributor to exports in the CEE countries. How-ever, its role and its influence vary between CEE economies and change over time. Purpose of the article: The main objective of this paper is to compare the determinants of the international competitiveness, measured by the net exports of the manufacturing sectors in the Czech and Polish economies, by using the database of 13 manufacturing sub-sectors in 1995-2011. The authors research the question of how much foreign and domestic demand, the level of labour costs, the level of sector innovation intensity, the level of sector openness to foreign markets as well as sectoral labour productivity influence the changes in trade balance. Methods: Our approach is based on employing an error correction model and SUR model to disaggregated sectoral manufacturing data. Findings & Value added: The results of the analysis conducted show substantial differences in the roles particular variables play in explaining the net exports in individual sectors. For the majority of Polish and Czech manufacturing sub-sectors, generation of positive trade balance is determined by relative demand growth. An increasing labour productivity influences heavily a positive trade balance of Polish goods in majority of sub-sectors, however, a key factor in Czech sub-sectors is decreasing unit labour costs. The results of the analysis indicate mostly a greater impact of the researched factors on net exports in long rather than short term and the better capacity of the Czech economy to correct deviations from the equilibrium.

Suggested Citation

  • Magdalena Olczyk & Aleksandra Kordalska, 2018. "Determinants of trade balance in Polish and Czech manufacturing sectors," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 13(3), pages 445-466, September.
  • Handle: RePEc:pes:ierequ:v:13:y:2018:i:3:p:445-466
    DOI: 10.24136/eq.2018.022
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    Citations

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    Cited by:

    1. Veronika MACHOVA & Jakub HORAK, 2019. "Gdp As A Risk Factor Of Czech Enterprises," Proceedings of the INTERNATIONAL MANAGEMENT CONFERENCE, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 13(1), pages 785-798, November.
    2. Muzammil, Muhammad, 2020. "A Comparison of Agricultural, Industrial and Services Sector Impact on Trade Balance: A Case Study of Pakistan," MPRA Paper 95750, University Library of Munich, Germany.
    3. Katarzyna Łukiewska & Małgorzata Juchniewicz, 2021. "Identification of the Relationships between Competitive Potential and Competitive Position of the Food Industry in the European Union," Sustainability, MDPI, vol. 13(8), pages 1-13, April.

    More about this item

    Keywords

    CEE economies; trade balance; international competitiveness; manufacturing; error correction model;
    All these keywords.

    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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