Shocks Transmission Through Real Channel: The Case of the Central and Eastern European Countries

Abstract

While the Central and Eastern European countries (CEECs) are among the world’s most open economies, this group of countries is very vulnerable to the external shocks that can be transmitted through real channel. Besides, most of the scientists focus on the transmission of shocks to the real economy in the USA, China, and other largest world economies. For this reason this empirical study focuses on macroeconomic shocks transmission through real channel in the CEECs countries. The empirical results show a strong effect of real GDP shock in main export partners on the real GDP in the CEECs countries and this effect is almost the same strong as the GDP shock in the domestic countries. The empirical results suggest that real exports flows of the CEECs react to the external shocks in the main export countries stronger compared to GDP. The empirical results confirm that the CEECs are very sensitive to shocks in main export partners; however, the effect is not very long lasting suggesting that CEECs adjust to the external macroeconomic changes.