Macroeconomic Adjustment and Foreign Trade of Centrally Planned Economies

38 Pages Posted: 18 Aug 2004 Last revised: 8 Jul 2010

See all articles by John Burkett

John Burkett

University of Rhode Island

Richard Portes

London Business School - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

David Winter

Independent

Date Written: August 1981

Abstract

This empirical study stresses the underlying macroeconomic forces which determine foreign trade flows in CPEs. The general specification includes a planners' demand equation for the volume of imports, a planners' supply equation for the volume of exports, and a rest-of-world demand equation for the export price level. The planners' behavioural equations include variables for activity levels, trade balance constraints, prices, and domestic excess demand. The import price is exogenous. This simultaneous equation model is estimated on annual data from the mid-1950s to the mid-1970s, for Czechoslovakia, the GDR, Hungary, and Poland. Maximum likelihood estimation in a nested hypothesis testing framework allows selection of restricted versions of the general model for each country. Estimated price elasticities accord with the underlying theory, and the excess demand variables perform well.

Suggested Citation

Burkett, John and Portes, Richard and Winter, David, Macroeconomic Adjustment and Foreign Trade of Centrally Planned Economies (August 1981). NBER Working Paper No. w0736. Available at SSRN: https://ssrn.com/abstract=349125

John Burkett (Contact Author)

University of Rhode Island ( email )

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Richard Portes

London Business School - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

David Winter

Independent

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