Abstract
Research background: Growth model in CEE countries has based on a massive inflow of direct foreign investments, especially in manufacturing, from the onset of the transformation. This resulted in a substantial share of manufacturing goods in total exports and a high ranking position of some CEE countries among the most industrialized economies in the world. 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. Methodology/methods: Our approach is based on employing an error correction model and SURE 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.
Highlights
CEE exports represent a major source of growth, so positive net exports is a sign of a high level of international competitiveness
For many CEE countries export represents a major source of growth, so positive net exports could be a measure of their level of international competitiveness
Our new approach is based on employing an error correction model to disaggregated sectoral manufacturing data
Summary
CEE exports represent a major source of growth, so positive net exports is a sign of a high level of international competitiveness. Knowledge about the main determinants of net exports, especially at the level of individual sectors, seems to be crucial for creating an appropriate export-led growth strategy. The researches identifying the determinants of manufacturing trade balance of CEE countries are scarce. For this reason authors want to fill the gap in the empirical literature on the determinants of CEE net exports, based on Poland and the Czech Republic, two leading economies among Central and East-European. In the subsequent part the authors present the results of the empirical analysis. The last part of the paper contains conclusions drawn from the conducted research
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