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Interest premium and economic growth: the case of CEE

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  • Dániel Baksa

    (Central European University and Center for Economic and Regional Studies)

  • István Kónya

    (Center for Economic and Regional Studies and Central European University)

Abstract

This paper views the growth and convergence process of the four Visegrad economies - the Czech Republic, Hungary, Poland and Slovakia - through the lens of the open economy, stochastic neoclassical growth model. We use a unified framework to understand both the long-run convergence path and fluctuations around it. Our empirical exercise highlights both the role of initial conditions such as indebtedness and capital intensity, and random shocks in the growth process. In particular, we explore the importance of the external interest rate premium, and its role in driving investment and the trade balance.

Suggested Citation

  • Dániel Baksa & István Kónya, 2017. "Interest premium and economic growth: the case of CEE," NBP Working Papers 266, Narodowy Bank Polski.
    • Handle: RePEc:nbp:nbpmis:266
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    References listed on IDEAS

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    1. Guerron-Quintana, Pablo A., 2013. "Common and idiosyncratic disturbances in developed small open economies," Journal of International Economics, Elsevier, vol. 90(1), pages 33-49.
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    Cited by:

    1. Kónya, István, 2017. "A magyar növekedésről - egy régimódi megközelítés [Hungarian growth: an old-fashioned approach]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 915-929.

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    More about this item

    Keywords

    stochastic growth; technology shocks; interest premium; small open economy; Bayesian estimation.;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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