Real currency appreciation in accession countries : Balassa-Samuelson and investment demand
| Title: | Real currency appreciation in accession countries : Balassa-Samuelson and investment demand |
| Author: | Fischer, Christoph |
| Organization: | Bank of Finland |
| Department / Unit: | Institute for Economies in Transition (BOFIT) |
| Series: | BOFIT Discussion Papers |
| Series number: | 8/2002 |
| Year of publication: | 2002 |
| Publication date: | 10.7.2002 |
| Published in: | Published in Review of World Economics/Weltwirtschaftliches Archiv vol. 140, no 2 (2004), pp. 179-210 |
| Pages: | 32 s. |
| Keywords: | valuuttakurssit; häiriöt; tuottavuus; KIE; revalvaatio; valuutat; mallit; siirtymätaloudet; kansantaloustiede; Bofit-kokoelma; hakijamaat; Balassa-Samuelson effect; uudet EU-maat |
| JEL: | F31; F41; C33 |
| Abstract: | 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 |
| Rights: | https://helda.helsinki.fi/bof/copyright |
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