Long-Run Elasticity of the Substitution in the Slovak Economy

5 Pages Posted: 20 Nov 2018

See all articles by Karol Szomolányi

Karol Szomolányi

University of Economics in Bratislava - Department of Operations Research and Econometrics

Martin Lukacik

University of Economics in Bratislava - Department of Operations Research and Econometrics

Adriana Lukacikova

University of Economics in Bratislava - Department of Operations Research and Econometrics

Date Written: September 7, 2017

Abstract

The value of the Slovak long-run elasticity substitution is relatively slow – about 0.10. It follows from the estimate of low-frequency econometric model. Econometric form is given by the capital demand derived from the first-order conditions of the firm maximizing its profit. Due to the robustness we use different measures of the economic variables. The basic data gathered from the National Bank of Slovakia data portal consists of the real and nominal output, nominal capital, output price and different interest rates. A challenge is to find real capital time series. One way is to use a net investment deflator computed from the real and nominal gross fixed investment and the consumption of the fixed capital. The low-pass filter of data series is used to measure the long-run value of variables.

Keywords: long-run elasticity of substitution, low-pass data filter, Slovak economy, capital demand, first order condition of the profit maximising firm

JEL Classification: C23, E22, E25

Suggested Citation

Szomolányi, Karol and Lukacik, Martin and Lukacikova, Adriana, Long-Run Elasticity of the Substitution in the Slovak Economy (September 7, 2017). 2017 ENTRENOVA Conference Proceedings. Available at SSRN: https://ssrn.com/abstract=3282550 or http://dx.doi.org/10.2139/ssrn.3282550

Karol Szomolányi (Contact Author)

University of Economics in Bratislava - Department of Operations Research and Econometrics ( email )

Dolnozemská cesta 1
Bratislava, 852 35
Slovakia

Martin Lukacik

University of Economics in Bratislava - Department of Operations Research and Econometrics ( email )

Dolnozemská cesta 1
Bratislava, 852 35
Slovakia

Adriana Lukacikova

University of Economics in Bratislava - Department of Operations Research and Econometrics

Dolnozemská cesta 1
Bratislava, 852 35
Slovakia

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