Panel regression for the GDP of the Central and Eastern European countries using time-varying coefficients

ArXiv ID: 2510.04211 “View on arXiv”

Authors: Lesya Kolinets, Vygintas Gontis

Abstract

The integration of Central and Eastern European (CEE) countries into the European Economic Area serves as a valuable experiment for the regional economic development theory. The long-lasting convergence of these economies with more advanced Western Europe exhibits a few standard features and varying policies implemented. Even the Baltic countries, which started from very similar starting positions, demonstrate their unique trajectories of development. We employ a panel data regression model that allows coefficients to vary over time to compare the contributions of a few macroeconomic factors to the GDP growth of CEE countries. In particular, we regress the annual change of GDP per capita in PPP terms as a function of achieved GDP, price, trade, investment, and debt levels. Time-varying common slope coefficients in this approach describe the external economic environment in which countries implement their own policies. The panel consists of 11 Central and Eastern European countries (Bulgaria, Czechia, Estonia, Croatia, Latvia, Lithuania, Hungary, Poland, Romania, Slovenia, and Slovakia), which have been observed annually from 1995 to 2024. While the main selected factors of this investigation contribute to economic growth, in agreement with previous findings, the role of private debt appears vital in determining the pace of economic growth.

Keywords: Macroeconomics, Economic Growth, Panel Data Regression, Convergence Theory, Central and Eastern Europe, Macroeconomic Indicators (GDP)

Complexity vs Empirical Score

  • Math Complexity: 4.5/10
  • Empirical Rigor: 7.0/10
  • Quadrant: Street Traders
  • Why: The paper uses a time-varying coefficient panel regression, which involves moderate mathematical complexity (matrix operations and time-varying parameter estimation), but the empirical setup is heavily data-driven, utilizing 11 countries over 30 years (1995–2024) with real-world macroeconomic data from established sources, making it quite ready for empirical validation and implementation.
  flowchart TD
    A["Research Goal:<br>Impact of Macroeconomic Indicators<br>on GDP Growth in CEE Countries"] --> B["Data: 11 CEE Countries<br>1995-2024 Panel Data"]
    B --> C["Methodology:<br>Panel Regression with<br>Time-Varying Coefficients"]
    C --> D["Computations:<br>Regress GDP Growth vs.<br>GDP, Price, Trade, Investment, Debt"]
    D --> E["Key Findings:<br>Convergence Dynamics &<br>Critical Role of Private Debt"]