Abstract
A dynamic and growing manufacturing sector is critical for growth as this sector is globally known as the 'engine of growth'. The objective of this study was to assess the impact of macro-economic variables, including economic growth, producer price index (PPI), and exports on the manufacturing sector of the Visegrád countries, from 1995 to 2018. A quantitative research methodology was utilized via a panel data analysis to assess the long- and short-run relationships between the variables using econometric methods such as the Fisher-Johansen co-integration test, FMOLS and DOLS, and Granger causality tests. The main results indicated a long-run relationship between all the variables, with economic growth having the highest impact on manufacturing, while an increase in exports was also found to enhance the sector. Therefore, governments in the Visegrád group should endeavour to stimulate economic activities in support of the manufacturing sector by means of stable macro-economic policy implementation.
Highlights
The manufacturing sector has been responsible for economic growth for most modern economies and the sector has been described as the engine of growth for many decades (McCausland & Theodossiou, 2012)
This paper's primary aim was to explore the relationship between the manufacturing sector, economic growth, producer price index, export, and exchange rate
The panel fully modified ordinary least squares (FMOLS) results show that all the explanatory variables exert positive impacts on the manufacturing sector, with gross domestic product (GDP) having the highest elasticity coefficient
Summary
The manufacturing sector has been responsible for economic growth for most modern economies and the sector has been described as the engine of growth for many decades (McCausland & Theodossiou, 2012). The research question applicable in this research was to determine which macro-economic variables impact the manufacturing sector, and the Visegrád countries were selected for the analysis. According to Haraguchi, Cheng and Smeets (2017), manufacturing is critically important for economic growth and development; the sector's importance and role have diminished over the last few decades with the rise of the services sector. This process resulted in a lack of industrialisation in developing countries. In looking at the future, Haraguchi et al (2017) argued that developing countries should still have industrialisation as a key strategy for development
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