The Balassa-Samuelson effect in Central and Eastern Europe: Myth or reality?

Balázs Égert, Imed Drine, Kirsten Lommatzsch and Christophe Rault

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Abstract: This paper studies the Balassa-Samuelson effect in nine Central and East European countries. Using panel cointegration techniques, we find that the productivity growth differential in the open sector leads to inflation in non-tradable goods. Because of the low share of non-tradables and the high share of food items in addition to regulated prices, the consumer price index is misleading when analyzing the Balassa-Samuelson effect. Consequently, the appreciation of the real exchange rate, which has been established as a stylized fact over the last decade, is caused only partly by the Balassa-Samuelson effect. We identify a trend increase in the prices of tradable goods as a contributing explanation. © Association for Comparative Economic Studies. Published by Elsevier Inc. All rights reserved.

Keywords: Balassa-Samuelson effect; EMU; Panel cointegration; Transition economies (search for similar items in EconPapers)
Date: 2003-09
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Citations: View citations in EconPapers (41)

Published in Journal of Comparative Economics, 2003, 31 (3), pp.552--572. ⟨10.1016/S0147-5967(03)00051-9⟩

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Working Paper: The Balassa-Samuelson Effect in Central and Eastern Europe: Myth or Reality? (2005)
Journal Article: The Balassa-Samuelson effect in Central and Eastern Europe: myth or reality? (2003)
Working Paper: The Balassa-Samuelson effect in Central and Eastern Europe: Myth or reality? (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02878012

DOI: 10.1016/S0147-5967(03)00051-9

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