Price Convergence: What Can the Balassa-Samuelson Model Tell Us?

Tomas Holub and Martin Cihak ()

Working Papers from Czech National Bank, Research and Statistics Department

Abstract: The paper provides a theoretical reference point for discussions on adjustments in price levels and relative prices. The authors present a 'nested' model integrating the Balassa-Samuelson model of the real equilibrium exchange rate with a model of accumulation of capital and with the demand side of the economy. Consequently, they show how the model can be generalised to a case of numerous commodities with different degrees of tradability. The predictions of the model are generally consistent with empirical findings for Central and Eastern European countries. The authors show how the theoretical model can be used for internally consistent simulations of the future convergence process in a transition economy.

Keywords: Balassa-Samuelson model; inflation; relative prices. (search for similar items in EconPapers)
JEL-codes: E31 E52 E58 F15 P22 (search for similar items in EconPapers)
Date: 2003-12
New Economics Papers: this item is included in nep-int, nep-mac, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:cnb:wpaper:2003/08

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