Estimating the Baumol-Bowen and Balassa-Samuelson Effects in the Polish Economy - a Disaggregated Approach

Karolina Konopczak () and Andrzej Torój
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Karolina Konopczak: Polish Ministry of Finance and Institute for Market, Consumption and Business Cycles Research

Central European Journal of Economic Modelling and Econometrics, 2010, vol. 2, issue 2, 117-150

Abstract: This paper estimates the magnitude of the Baumol-Bowen and Balassa-Samuleson effects in the Polish economy. The purpose of the analysis is to establish to what extent the differential price dynamics in Poland and in the euro area and the real appreciation of PLN against EUR are explained by the differential in respective productivity dynamics. The historical contribution of the Baumol-Bowen effect to Polish inflation rate is estimated at 0:9 - 1:0 percentage points in the short run. According to estimation results, the Balassa-Samuelson effect contributed around 0:9 to 1:0 percentage point per annum to the rate of relative price growth between Poland and the euro area and 1:0 to 1:2 p.p. to real exchange rate appreciation. The long-run effects are of an approximately twice larger magnitude. Sub-sample calculations and productivity trends over the last decade suggest that this impact should be declining. However, its size is still non-negligible for policymakers in the context of euro adoption in Poland.

Keywords: Balassa-Samuelson hypothesis; monetary integration; real appreciation; panel cointegration (search for similar items in EconPapers)
JEL-codes: C33 E31 F31 F41 (search for similar items in EconPapers)
Date: 2010
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Related works:
Working Paper: Estimating the Baumol-Bowen and Balassa-Samuelson effects in the Polish economy - a disaggregated approach (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:psc:journl:v:2:y:2010:i:4:p:117-150

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