Published: 31.12.2011 Updated: 08.01.2013
2012/6

Forecasting and Signal Extraction with Regularised Multivariate Direct Filter Approach   (2.43 Mb)
Ginters Buss

Abstract
The paper studies regularised direct filter approach as a tool for high-dimensional filtering and real-time signal extraction. It is shown that the regularised filter is able to process high-dimensional data sets by controlling for effective degrees of freedom and that it is computationally fast. The paper illustrates the features of the filter by tracking the medium-to-long-run component in GDP growth for the euro area, including replication of Eurocoin-type behavior as well as producing more timely indicators. A further robustness check is performed on a less homogeneous dataset for Latvia. The resulting real-time indicators are found to track economic activity in a timely and robust manner. The regularised direct filter approach can thus be considered a promising tool for both concurrent estimation and forecasting using high-dimensional datasets and a decent alternative to the dynamic factor methodology.

 


Keywords: high-dimensional filtering, real-time estimation, coincident indicator, leading indicator, parameter shrinkage, business cycles, dynamic factor model
JEL classification: C13, C32, E32, E37
2012/5

How Important is Total Factor Productivity for Growth in Central, Eastern and Southeastern European Countries?   (719.73 KB)
Julia Wörz
Konstantīns Beņkovskis
Ludmila Fadejeva
Robert Stehrer

Abstract
The evolution of total factor productivity (TFP) is a key determinant of long-run economic growth of a country. In this paper we analyse the contributions from technological change at the industry level to an economy's aggregate growth performance. Our derivation of total TFP growth entails three major improvements over the traditional Solow residual approach. First, we allow for non-constant returns to scale as well as changes in the utilisation of input factors in our estimation of industry TFP growth. Second, we use a novel approach to aggregate TFP from industry level to macro level, which incorporates both direct and indirect effects through intermediate linkages within an economy. Third, we take account of open economy characteristics by assigning an explicit role to terms-of-trade shocks. Our calculations for the sample of 10 Eastern European EU Member States over the time period from 1995 to 2009 are based on the newly available World Input-Output Database (WIOD).

Keywords: total factor productivity, terms of trade, utilisation, input-output table, Central, Eastern and Southeastern Europe
JEL codes:
C23, D24, E23, O47

2012/4

The Assessment of Equilibrium Real Exchange Rate of Latvia  (942.37 Kb)
Viktors Ajevskis
Ramune Rimgailaite
Uldis Rutkaste
Oļegs Tkačevs

Abstract
The aim of this study is to estimate the equilibrium REER of Latvia, which was done by using different methodologies, including IMF CGER approach, and the NATREX and SVAR models. The IMF methodology implies the application of three different methods: the macroeconomic balance method, the external sustainability method and the reduced-form equilibrium real exchange rate method. The results of all approaches used in this study indicate that the real exchange rate of Latvia, after appreciation during the boom years and subsequent adjustment afterwards, remained close to its equilibrium level at the end of the sample period, i.e. at end-2010.

Keywords: equilibrium real exchange rate, BEER, macroeconomic balance, external sustainability, NATREX, SVAR, Latvia
JEL classification: F31, F32, O24
2012/3

Competitiveness of Latvia's Exporters   (855.87 Kb)
Konstantīns Beņkovskis

Abstract
The paper evaluates competitiveness of Latvia's exporters from various aspects by using detailed trade data from Comtrade. Competitiveness represented by the market share of Latvia's products in world trade was on the rising trend, growing almost two times between 1999 and 2010. Such a dynamic improvement was mainly accounted for by intensive margin, as Latvia's exporters increased their presence on traditional markets. Moreover, the contribution of extensive margin was also positive due to geographical expansion. The analysis of non-price competitiveness signals that although Latvia's export unit values were increasing faster than those of its main rivals, relative quality and taste for Latvia's products were rising even faster, and, overall, competitiveness of Latvia's exporters improved.

Keywords: exports, extensive margin, intensive margin, non-price competitiveness, Latvia
JEL classification: C43, F12, F14, L15
2012/2

A New Real-Time Indicator for the Euro Area GDP   (1.46 Mb)
Ginters Buss

Abstract
The paper proposes a new real-time unrevised indicator tracking medium-to-long-term component in the quarterly growth of the euro area GDP. The new indicator is based on recently developed real-time filtration methodology, the multivariate direct filter approach, applied to selected business and consumer survey and share price data. The new indicator is found to have led another established indicator, the Eurocoin, by about three months since mid-2009 and be about coincident with but smoother than the PMI. In addition to the euro area aggregate indicator, the paper presents prototypical indicators for four biggest EU economies – Germany, France, the UK and Italy. Overall, the described filter approach appears to be able to provide somewhat better results in tracking business cycle developments than other widely used approaches.

Keywords: real-time signal extraction, coincident indicator, multivariate direct filter approach
JEL classification: C13, C32, E32, E37
2012/1

 Evaluation of non-price competitiveness of exports from Central, Eastern and Southeastern European countries in the EU market   (694.67 Kb)
Konstantins Benkovskis, Julia Wörz

Abstract
We propose an export price indicator adjusted for non-price factors as a measure of a country's competitiveness. Based on the approach by Broda and Weinstein (2006) who adjust price developments for changes in varieties of imported products, we relax their assumption of unchanged quality over time and apply this index to export prices of the ten CESEE EU Member States which acceded in 2004 and 2007. The index is calculated using data from Comext at the highly disaggregated eight-digit CN product level. Our analysis spans the time period from 1999 to 2010, thus including the recent global recession in 2009. The results show that all CESEE10 countries experienced loss in price competitiveness, although much smaller than is usually suggested by the traditional CPI-based or ULC-based real effective exchange rate measures. Although relative export prices (unit values) increased stronger in CESEE10 countries as compared with their competitors, the average quality of their goods increased even more, thus fully compensating for the rise in prices. These improvements in non-price competitiveness were pronounced in all CESEE10 countries.

Keywords: non-price competitiveness, quality, relative export price
JEL classification: C43, F12, F14, L15