A World Link CGE Model Applied to the Economic Reform in the Slovak Republic and EU Enlargement A world link CGE model applied to the economic reform in the Slovak Republic and EU Enlargement

The objective of this paper is to analyze the consequences of Slovak Republic's EU integration by identifying the positive and negative impacts of this process. Specifically, the research is aimed to directly evaluate the impacts of EU accession based on a World Link Standard Computable General Equilibrium Model, in the short-, medium-, and long-term, and to confirm (or reject) a general opinion that integration should bring positive effects to the economy. Common EU market with free movement of commodities, labor and capital, structural reforms of Slovak Republic consequential to EU integration, and FDI flows, are the main policies under consideration. By developing a link CGE model applicable to the conditions and structure of not only the Slovak economy but of EU and the world, this paper identifies problems and based on the outcomes tries to make suggestions for policy measures. The research presented in this paper is new in several aspects. Source of data for each region is GTAP 6 database, with Slovak data supplemented by 2000 Social Accounting Matrix, Input-output and other data. Strong feature of the model is that it extends the concept of single-country CGE model into a world model, with each region having its own economy, and interconnected by international linkages. The model solves for equilibrium in each individual region and for the whole world at the same time. The world in the model is divided into several regions (countries), where the regional models are based on an individual Standard CGE model used by the World Bank. Every region is linked together and international flows are provided via channels of trade, labor, capital, labor remittances, and returns from capital. The link CGE model in this research has been designed to allow sectoral, regional (country), or international impact analyses. The model allows to carry out static and dynamic simulations ; range for dynamic simulations is a period of 10 years with year 2001 as benchmark. Model functions are either of CES or CET type.