Convergence Dynamics of a Transition Economy : Case of the Czech Republic
ISBN: 9781451911336
Platform/Publisher: Ebook Central / International Monetary Fund
Digital rights: Users: Unlimited; Printing: Limited; Download: 7 Days at a Time
Subjects: Business/ Management; Economics;

In this paper we develop a two-country dynamic general equilibrium model by means of which we seek to explain the long-run paths of a converging emerging market economy. We borrow a paradigm from the New Open Economy Macroeconomics literature and amend it to address specific features such as initial asymmetry in development and size of economies as well as different speed of capital accumulation. Using a calibration of productivity and deep parameters for the Czech economy we demonstrate the ability of the model to consistently replicate dynamics in key macroeconomic variables that are essential inputs for commonly used "gap models" in monetary policy routine. Based on the calibration we draw implications for future convergence of the Czech economy.


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