Can Trade Partners Help Better Forcee the Future? Impact of Trade Linkages on Economic Growth Forecasts in Selected Cesee Countries

Focus on European Economic Integration, Oesterreichische Nationalbank, Forthcoming

21 Pages Posted: 18 Nov 2015

See all articles by Tomas Slacik

Tomas Slacik

Austrian National Bank - Foreign Research Division

Katharina Steiner

Oesterreichsiche Nationalbank (OeNB)

Julia Wörz

Oesterreichische Nationalbank (OeNB)

Date Written: März 2014

Abstract

For Central, Eastern and Southeastern European (CESEE) countries, the euro area is the most important export destination. Nevertheless, geographical export patterns differ among individual CESEE countries, and economic growth within the euro area has diverged in the run-up to and since the economic and financial crisis. We therefore examine the effects such heterogeneous developments have had on trade – and thus economic growth – in CESEE. Given the importance of such spillovers for macroeconomic projections, we evaluate the OeNB’s macroeconomic forecasting model (FORCEE) for Bulgaria, Croatia, the Czech Republic, Hungary, Poland and Romania. The FORCEE model captures trade spillovers via aggregate demand from the euro area. We challenge this simplification by introducing a more differentiated representation of the regional structure of trading partners. Our results show that such a modification improves the forecasting performance of our structural macro model in particular for the three Southeastern European countries in our sample. However, our tests do not yet account for the additional uncertainty introduced into the model by broadening the set of external assumptions, when we cover external demand from a wider range of partner countries.

Keywords: trade linkages, forecasting, Central, Eastern and Southeastern Europe

JEL Classification: C14, C53, E37, F17

Suggested Citation

Slacik, Tomas and Steiner, Katharina and Wörz, Julia, Can Trade Partners Help Better Forcee the Future? Impact of Trade Linkages on Economic Growth Forecasts in Selected Cesee Countries (März 2014). Focus on European Economic Integration, Oesterreichische Nationalbank, Forthcoming . Available at SSRN: https://ssrn.com/abstract=2691311

Tomas Slacik

Austrian National Bank - Foreign Research Division ( email )

Otto-Wagner-Platz 3
Vienna, A-1011
Austria

Katharina Steiner

Oesterreichsiche Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna, A-1011
Austria

Julia Wörz (Contact Author)

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

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