IDEAS home Printed from https://ideas.repec.org/a/sek/jijoes/v4y2015i2p57-68.html
   My bibliography  Save this article

The role of foreign sentiment in small open economy

Author

Listed:
  • Jana Juriová

    (V?B - Technical University of Ostrava)

Abstract

The role of foreign sentiment is researched for explaining macroeconomic fluctuations in small open economy. The main goal is to find out whether the domestic variables react significantly to the shocks in the foreign sentiment. For this purpose a structural vector autoregression model is constructed for the Czech Republic and the Slovak Republic including relations between foreign environment and domestic variables. Both small open economies considered are highly dependent on foreign demand from euro area. Therefore the foreign development is represented by real GDP in euro area and alternatively is explored the possibility to replace foreign real GDP by economic sentiment indicator of euro area as sentiment indicators are available in advance. The impact of foreign shocks is examined by impulse response functions on the following domestic variables ? real gross domestic product, consumer prices and effective exchange rate against euro area trading partners. The study confirms that foreign economic sentiment can be used for explaining fluctuations of domestic variables of a small open economy.

Suggested Citation

  • Jana Juriová, 2015. "The role of foreign sentiment in small open economy," International Journal of Economic Sciences, International Institute of Social and Economic Sciences, vol. 4(2), pages 57-68, June.
    • Handle: RePEc:sek:jijoes:v:4:y:2015:i:2:p:57-68
    as

    Download full text from publisher

    File URL: https://iises.net/international-journal-of-economic-sciences/publication-detail-191
    Download Restriction: no
    File URL: https://iises.net/international-journal-of-economic-sciences/publication-detail-191?download=5
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-673, September.
    2. Joscha Beckmann & Ansgar Belke & Michael Kühl, 2011. "Global Integration of Central and Eastern European Financial Markets—The Role of Economic Sentiments," Review of International Economics, Wiley Blackwell, vol. 19(1), pages 137-157, February.
    3. Torres,Francisco & Giavazzi,Francesco (ed.), 1993. "Adjustment and Growth in the European Monetary Union," Cambridge Books, Cambridge University Press, number 9780521440196, November.
    4. Garratt, Anthony & Lee, Kevin & Pesaran, M. Hashem & Shin, Yongcheol, 2012. "Global and National Macroeconometric Modelling: A Long-Run Structural Approach," OUP Catalogue, Oxford University Press, number 9780199650460.
    5. Laurent Ferrara & Dominique Guégan & Patrick Rakotomarolahy, 2010. "GDP nowcasting with ragged-edge data: a semi-parametric modeling," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 29(1-2), pages 186-199.
    6. Martin Bronfenbrenner, 1979. "On the locomotive theory in international macroeconomics," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 115(1), pages 38-50, March.
    7. Sarah Gelper & Christophe Croux, 2010. "On the Construction of the European Economic Sentiment Indicator," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(1), pages 47-62, February.
    8. Bas Aarle & Marcus Kappler, 2012. "Economic sentiment shocks and fluctuations in economic activity in the euro area and the USA," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 47(1), pages 44-51, January.
    9. Dominique Guegan & Patrick Rakotomarolahy, 2010. "Alternative methods for forecasting GDP," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00505165, HAL.
    10. Faust, Jon & Leeper, Eric M, 1997. "When Do Long-Run Identifying Restrictions Give Reliable Results?," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(3), pages 345-353, July.
    11. King, Robert G. & Plosser, Charles I. & Stock, James H. & Watson, Mark W., 1991. "Stochastic Trends and Economic Fluctuations," American Economic Review, American Economic Association, vol. 81(4), pages 819-840, September.
    12. Teresa Santero & Niels Westerlund, 1996. "Confidence Indicators and Their Relationship to Changes in Economic Activity," OECD Economics Department Working Papers 170, OECD Publishing.
    13. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-1357, September.
    14. Pierre St-Amant & David Tessier, 1998. "A Discussion of the Reliability of Results Obtained with Long-Run Identifying Restrictions," Staff Working Papers 98-4, Bank of Canada.
    15. Dominique Guegan & Patrick Rakotomarolahy, 2010. "Alternative methods for forecasting GDP," PSE-Ecole d'économie de Paris (Postprint) halshs-00511979, HAL.
    16. Dominique Guegan & Patrick Rakotomarolahy, 2010. "Alternative methods for forecasting GDP," Post-Print halshs-00505165, HAL.
    17. Luís Aguiar-Conraria & Manuel M.F. Martins & Maria Joana Soares, 2013. "Convergence of the Economic Sentiment Cycles in the Eurozone: A Time-Frequency Analysis," Journal of Common Market Studies, Wiley Blackwell, vol. 51(3), pages 377-398, May.
    18. Balcilar, Mehmet & Bagzibagli, Kemal, 2010. "Sources of Macroeconomic Fluctuations in MENA Countries," MPRA Paper 44351, University Library of Munich, Germany.
    19. Dominique Guegan & Patrick Rakotomarolahy, 2010. "Alternative methods for forecasting GDP," Post-Print halshs-00511979, HAL.
    20. Laurent Ferrara & Dominique Guegan & Patrick Rakotomarolahy, 2010. "GDP nowcasting with ragged-edge data: a semi-parametric modeling," Post-Print halshs-00460461, HAL.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Deimante Teresiene & Greta Keliuotyte-Staniuleniene & Yiyi Liao & Rasa Kanapickiene & Ruihui Pu & Siyan Hu & Xiao-Guang Yue, 2021. "The Impact of the COVID-19 Pandemic on Consumer and Business Confidence Indicators," JRFM, MDPI, vol. 14(4), pages 1-23, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. René Lalonde & Jennifer Page & Pierre St-Amant, 1998. "Une nouvelle méthode d'estimation de l'écart de production et son application aux États-Unis, au Canada et à l'Allemagne," Staff Working Papers 98-21, Bank of Canada.
    2. Mark S Astley & Tony Yates, 1999. "Inflation and real disequilibria," Bank of England working papers 103, Bank of England.
    3. Jena, Pradyot Ranjan & Majhi, Ritanjali & Kalli, Rajesh & Managi, Shunsuke & Majhi, Babita, 2021. "Impact of COVID-19 on GDP of major economies: Application of the artificial neural network forecaster," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 324-339.
    4. Chow, Hwee Kwan & Kim, Yoonbai, 2003. "A common currency peg in East Asia? Perspectives from Western Europe," Journal of Macroeconomics, Elsevier, vol. 25(3), pages 331-350, September.
    5. Gert Peersman, 2005. "What caused the early millennium slowdown? Evidence based on vector autoregressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 185-207.
    6. Shambaugh, Jay, 2008. "A new look at pass-through," Journal of International Money and Finance, Elsevier, vol. 27(4), pages 560-591, June.
    7. Carlo A. Favero, 2007. "Model Evaluation in Macroeconometrics: from early empirical macroeconomic models to DSGE models," Working Papers 327, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    8. John H. Rogers, 1995. "Real shocks and real exchange rates in really long-term data," International Finance Discussion Papers 493, Board of Governors of the Federal Reserve System (U.S.).
    9. Lastrapes, William D. & Selgin, George, 1995. "The liquidity effect: Identifying short-run interest rate dynamics using long-run restrictions," Journal of Macroeconomics, Elsevier, vol. 17(3), pages 387-404.
    10. Morgenroth, Edgar & FitzGerald, John & FitzGerald, John, 2006. "Summary and Conclusions," Book Chapters, in: Morgenroth, Edgar (ed.),Ex-Ante Evaluation of the Investment Priorities for the National Development Plan 2007-2013, chapter 24, pages 317-333, Economic and Social Research Institute (ESRI).
      • Baker, Terence J. & FitzGerald, John & Honohan, Patrick & FitzGerald, John & Honohan, Patrick, 1996. "Summary and Conclusions," Book Chapters, in: Baker, Terence J. (ed.),Economic Implications for Ireland of EMU, chapter 12, pages 339-352, Economic and Social Research Institute (ESRI).
    11. Afonso, Antonio & Claeys, Peter, 2008. "The dynamic behaviour of budget components and output," Economic Modelling, Elsevier, vol. 25(1), pages 93-117, January.
    12. Baker, Terence J. & FitzGerald, John & Honohan, Patrick & FitzGerald, John & Honohan, Patrick, 1996. "Introduction," Book Chapters, in: Baker, Terence J. (ed.),Economic Implications for Ireland of EMU, chapter 1, pages 1-9, Economic and Social Research Institute (ESRI).
    13. Canova, Fabio & de Nicolo, Gianni, 2003. "On the sources of business cycles in the G-7," Journal of International Economics, Elsevier, vol. 59(1), pages 77-100, January.
    14. Patrick Fève & Alain Guay, 2009. "The Response of Hours to a Technology Shock: A Two‐Step Structural VAR Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(5), pages 987-1013, August.
    15. Kenneth M. Kletzer, "undated". "Macroeconomic Stabilization with a Common Currency:," EPRU Working Paper Series 97-22, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    16. Farrant, Katie & Peersman, Gert, 2006. "Is the Exchange Rate a Shock Absorber or a Source of Shocks? New Empirical Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(4), pages 939-961, June.
    17. Mike Artis & Hans-Martin Krolzig & Juan Toro, 2004. "The European business cycle," Oxford Economic Papers, Oxford University Press, vol. 56(1), pages 1-44, January.
    18. Elbourne, Adam, 2008. "The UK housing market and the monetary policy transmission mechanism: An SVAR approach," Journal of Housing Economics, Elsevier, vol. 17(1), pages 65-87, March.
    19. Keating, John W., 2013. "What do we learn from Blanchard and Quah decompositions of output if aggregate demand may not be long-run neutral?," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 203-217.
    20. Shibamoto, Masahiko & Hayaki, Shoka & Ogisu, Yoshitaka, 2022. "COVID-19 infection spread and human mobility," Journal of the Japanese and International Economies, Elsevier, vol. 64(C).

    More about this item

    Keywords

    economic sentiment indicator; structural vector autoregression; variance decomposition; impulse response functions;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sek:jijoes:v:4:y:2015:i:2:p:57-68. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klara Cermakova (email available below). General contact details of provider: https://ijoes.iises.net/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.