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In view of economic instability in Ukraine, it's getting more and more relevant to study macroeconomic interrelations that would not only be based on long-term equilibrium trends, but at the same time would also represent the dynamic response of variables to shocks affecting the economic environment. The paper is aimed at an empirical study of long-term interrelations and a short-term adjustment mechanism when making consumer decisions by households in Ukraine. The paper presents a statistical analysis of the dynamic properties of the series of consumption, income and inflation. The paper also defines the stochastic trend and stochastic seasonality, it tests the existence and direction of causality in the interrelations, as well as it substantiates and estimates the cointegrating long-term equilibrium interrelation. Basing on the detected cointegration of the studied series, we developed an econometric dynamic error correction model that includes economic equilibrium relations derived from macroeconomic theory and also allows to model short-term effects of various factors on the rate of consumption change, such as changes in the rate of growth of income, changes in savings rates over the previous year, seasonality and deviations from a long-term equilibrium resulting from unanticipated shocks in the economy. The developed ECM-model is well-suited to predict changes in the levels and dynamics of fluctuations of the actual values of consumption and also has practical application in assessing and predicting the response of consumption, and thus aggregate demand, in making political and economic decisions both in a long-term perspective and in short-term adjustments.

PurposeThe purpose of this paper is to investigate the behavior peculiarities of the labor force participation in Eastern European countries.Design/methodology/approachThe authors provide the analysis of nonlinearity in dynamics of economic active population and perform the econometric analysis using logistic smooth transition autoregressive models that are flexible and capture various kinds of behavior for different modes. The paper investigates labor markets of six Eastern European countries, Hungary, Bulgaria, Poland, Slovakia, Romania and Croatia that are characterized by lower level of labor force participation rate (LFPR) than average level in EU.FindingsThe results of modeling quantitatively characterize smooth changes in the behavior modes of labor force activity for each country and indicate how population economic activity depends on previous labor market states. The estimated slope parameters that determine the smoothness of transition between regimes show that, in all countries, the labor force participation quite quickly reacts to changes that occurred on the labor market in the past. During recession periods, households of European countries that joint EU last decade in order to prevent the depletion of their total income increased labor supply and showed increased activity in job search.Originality/valueThis paper indicates the nonlinearity and asymmetry in LFPR in transition economies, discovers variety of its dynamics in the different regimes and determines the indicators that cause the change of the population economic activity behavior in each country.