FINAL DEMAND Y = C + I + G + (E-IM). THE EXPENDITURE STRUCTURE OF GDP 2008 and 2009 EU27 Slovenia SEE 200820092008200920082009 Private consumption57.558.453.055.486.179.2.

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Presentation transcript:

FINAL DEMAND Y = C + I + G + (E-IM)

THE EXPENDITURE STRUCTURE OF GDP 2008 and 2009 EU27 Slovenia SEE Private consumption Govt. consumption Gross investments Trade balance Exports Imports GDP

THE FINAL DEMAND STRUCTURE % GDP (2008) C+GIIMEXEX-IM Croatia Macedonia Albania BiH Montenegro Serbia Kosovo

AGGREGATE CONSUMPTION FUNCTION C = a + b * Yd C = a + b * (Y-T) a – autonomous expenditures a > 0 b – marginal propensity to consume0 < b <1 M = 1/(1-b) – multiplierM > 1 Equilibrium in the simplest economy C = a + b*Y, Y = C; Y = a + b*Y; (1-b)*Y = a Y = a/(1-b)

AGREGATE CONSUMPTION FUNCTION Multiplier : (Y1-Y0)/(a*-a) a C=Y Y C=a+b*Y Y0 C0 Y1 a*

THE EXPENDITURE STRUCTURE C i =A*Y a Engel curves a - income elasticity of demand a < 0; inferior goods, if income increases, the quantity bought decreases 0 < a < 1; if income grows the share a good in expenditures decreases; a > 1; superior goods, if income grows the share of a good increases

THE EXPENDITURE STRUCTURE EU27 and Slovenia EU27 Slovenia Food, beverages, tobacco Clothing&footwear Housing&housing appliances Transport&communications Health&education Recreation&culture Miscelaneous goods&services

INVESTMENTS Notions: gross, net; in fixed assets, in inventories; Agregate Investment Function: I t = F (r t, Q t - Q t-1, K t ) r – neoclassical explanation dQ – neokeynesian explanation Interest rate and rate of returns to investments; Present value of future income flows, remuneration for postponed consumption; Risks: business, financial, exchange rate, country; - Supply and demand of capital and financial assets;

EXPORTS AND IMPORTS Introduction: absolute (Smith) in relative (Ricardo) comparative advantages; Hechscher-Ohlin explanation; domestic, foreign and world market; Restrictions; custom duties and quatitative restrictions, quotas; The size of the country and the importance of trade Aggregate export and import functions The structure of trade: regional in production structure Gravity model: X ij = f (GDP i, GDP j, (GDP/capita) j, Distance i j ) The relevance of comparative advantages theory

WORLD TRADE

BALANCE OF PAYMENTS EU27 bill. € Current account Goods Services Incomes Transfers Capital account Direct investments Portfolio investments Other investments

CURRENT ACCOUNT AND FDI CountryCA/GDPFDI/GDPstock FDI/GDP ten years averages Czech Republic Estonia Hungary Latvia Lithuania Poland Slovakia Slovenia Average

THE FDI FINANCIAL LIFE CYCLE € EntryGrowth Repatriation of profits Profits Reinvested Profits Dividends SloveniaCzechRepublic Hungary Ireland

CAPITAL FLOWS IN CEE COUNTRIES

CAPITAL FLOWS IN CEE COUNTRIES DURING THE CRISIS