Revision of an Econometric Model for Slovakia

Abstract: In the first part the original version of a demand-oriented model of a country in transition is briefly presented. It consists of a demand block, an income block and a monetary block. The second part is concerned about the innovations, made in this version. Most important is the attempt to reflect the structural change by means of a generalized production function in intensive form. After characterizing the model, the author turns to policy evaluation. The model implies that investment crowds out labor quite strongly. Thus, the use of government transfers for labor beside transfers for investment is considered and some equations are modified. A "direct" and a grid search for optimal policy are presented. Finally, the results for practical decision making are summarized, finding transfers for labor efficient in fighting unemployment and ensuring output growth.;