THE IMPACT OF NATIONAL COMPETITIVENESS ON THE ECONOMIC GROWTH OF EUROPEAN ECONOMIES

Abstract

The aim of this paper is to examine the impact of national competitiveness, measured by GCI 4.0, on the economic growth of European economies within the CEFTA free trade zone, the European Single Market, and the European Monetary Union. The impact of GCI 4.0 on economic growth is analyzed collectively at the level of European economies (34 countries observed), and then analytically per levels of economic integration in CEFTA, EU, and EMU. Panel regression models are used in the paper to assess this impact, namely the Pooled OLS model, fixed effects model (FEM), and random effects model (REM), which increase the number of observations and thus alleviate the research limitation related to a short observation period. The obtained values of the F-test and Breusch-Pagan LM test show that for all 4 observed groups of countries there are significant fixed and random effects. Based on the results of the Sargan-Hansen test, the FEM model was used to estimate the parameters and predict the values of the dependent variable lnRBDP_pc based on changes in the values of the independent variable lnGCI4_0 for the observed European economies collectively as well as at the European Union and the European Monetary Union integration levels. The REM model was used for the CEFTA integration level. Research results show that there exists a positive and statistically significant impact of national competitiveness on real economic growth at the level of the observed European economies collectively as well as analytically within the CEFTA free trade zone, the European Single Market, and the European Monetary Union in the period 2018-2019. The results further show that an increase in the value of the global national competitiveness index 4.0 by 1% leads to increase in real GDP pc by 1.659% within the 34 European economies observed (CEFTA, EU, and EMU). An increase in the value of GCI 4.0 by 1% within CEFTA leads to increase in the value of real GDP pc by 2.183%; at the level of the European Union it leads to increase in the value of real GDP pc by 1.772%, while at the level of the European Monetary Union the growth of GCI 4.0 by 1% leads to increase in the value of real GDP pc by 1.256%. The results show that the strength of the impact decreases with a higher level of economic integration of countries, higher average value of GCI 4.0, and higher average real gross domestic product per capita, because within the observed economies the lowest value of GCI 4.0 and real GDP per capita is within the CEFTA free trade zone, followed by the European Union, while the highest values of GCI 4.0 and real GDP pc are at the level of the European Monetary Union. The cause of this can be found in the fact that when all analytical pillars of national competitiveness that will lead to an increase in economic growth are significantly improved, in order to ensure further growth it is necessary to identify and improve new factors of economic growth.