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OUR ECONOMY

Impact of Terms-of-Trade on Slovakia, the Czech Republic, and Croatia in the Short Run

Karol Szomolányi, Martin Lukáčik, Adriana Lukáčiková

Abstract


The terms-of-trade shocks are not main source of business cycles in three postcommunist
countries (i.e., Slovakia, the Czech Republic, and Croatia). The zero
or negative reactions of the trade balance in terms-of-trade positive shocks in
the countries exhibit the Obstfeld-Svensson-Razin effect, according to which
the Harberger-Laursen-Metzler positive effect on terms-of-trade indicates that
the smaller the trade balance, the more persistent the terms-of-trade shock is.
The conclusions come from the structural vector autoregressive analysis of the
cyclical components of terms-of-trade, trade balance, output, consumption, and
investment in three post-communist countries.


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