Browsing by Subject "Balassa-Samuelson effect"

Sort by: Order: Results:

Now showing items 1-2 of 2
  • Égert, Balázs (2002)
    BOFIT Discussion Papers 6/2002
    Published in Economics of Transition vol 10, no 2 (2002), pp. 273-309
    This paper studies the Balassa-Samuelson effect in the Czech Republic, Hungary, Poland, Slovakia and Slovenia.Time series and panel co-integration techniques are used to show that the BS effect works reasonably well in these transition economies during the period 1991:Ql to 2001:Q2.However, productivity growth does not fully translate into price increases due to the structure of CPI indexes.We thus argue that productivity growth will not hinder the ability of the five EU accession candidates to meet the Maastricht criterion on inflation in the medium term.Moreover, the observed appreciation of the CPI-deflated real exchange rate is found to be systematically higher compared to the real appreciation justified by the Balassa-Samuelson effect, particularly in the cases of the Czech Republic and Slovakia.This may be partly explained by the trend appreciation of the tradable-goodsprice-based real exchange rate, increases in non-tradable sector prices due to price liberalisation and demand-side pressures, and the evolution of the nominal exchange rate due to the exchange rate regime and magnitude of capital inflows.
  • Fischer, Christoph (2002)
    BOFIT Discussion Papers 8/2002
    Published in Review of World Economics/Weltwirtschaftliches Archiv vol. 140, no 2 (2004), pp. 179-210
    The Balassa-Samuelson effect is usually seen as the prime explanation of the continuous real appreciation of central and east European (CEE) transition countries' currencies against their western counterparts.The response of a small country's real exchange rate to various shocks is derived in a simple model.It is shown that productivity shocks work not only through a Balassa-type supply channel but also through an investment demand channel. Therefore, empirical evidence apparently in favour of Balassa-Samuelson effects may require a re-interpretation.The model is estimated for a panel of CEE countries.The results are consistent with the model, plausibly explain the observed real appreciation and support the existence of the proposed investment demand channel.JEL classification: F31, F41, C33