Price and income convergence and the dynamic Penn effect in Central and Eastern Europe

Moritz Degler and Karsten Staehr ()
Additional contact information
Moritz Degler: Oxford Economics Ltd

Economic Change and Restructuring, 2021, vol. 54, issue 3, No 1, 635 pages

Abstract: Abstract The dynamic Penn effect denotes a close relationship between relative income and price levels over time. This paper examines whether the effect is present in the 11 EU countries from Central and Eastern Europe over the period 1995–2018. The analysis comprises estimation of Pooled Mean Group panel data models. The estimations reveal a long-term relationship between the relative income and price levels, confirming the presence of a dynamic Penn effect. The long-term elasticity of the price level to income is slightly below one half. The adjustment to the common long-term relation differs substantially across the countries but is generally relatively slow, meaning that there can be extended periods of deviation from the common long-term relationship. The results are robust to various sample changes and to the inclusion of additional variables in the long-term specification.

Keywords: Price level; Real exchange rate; Convergence; Dynamic Penn effect; Pooled Mean Group estimation; Central and Eastern Europe (search for similar items in EconPapers)
JEL-codes: E31 O57 P24 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s10644-019-09248-6 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:ecopln:v:54:y:2021:i:3:d:10.1007_s10644-019-09248-6

Ordering information: This journal article can be ordered from
http://www.springer. ... nt/journal/10644/PS2

DOI: 10.1007/s10644-019-09248-6

Access Statistics for this article

Economic Change and Restructuring is currently edited by George Hondroyiannis

More articles in Economic Change and Restructuring from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().