Beyond the Salassa-Samuelson Effect in some New Member States of the European Union

José García-Solanes (), Francisco I. Sancho-Portero and Fernando Torrejón-Flores

No 1886, CESifo Working Paper Series from CESifo

Abstract: This paper analyses the Balassa and Samuelson hypothesis in two groups of European countries: six New Member States (NMS) and six advanced EU-15 economies. It is found that the second stage of the hypothesis, which relates relative sector prices with the real exchange rate, does not hold anywhere. In the NMS the main reasons are increased demand for domestic tradables stemming from positive differentials in economic growth, probably coupled with quality improvements in domestic tradable goods. In the EU-15, the explanatory factor is segmentation between national markets of tradables, caused by transportation costs, non-tariff barriers and imperfect competition between firms.

Keywords: Balassa-Samuelson effect; panel cointegration; economic transition; market segmentation; quality bias (search for similar items in EconPapers)
JEL-codes: C15 E31 F31 (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: Beyond the Balassa-Samuelson effect in some new member states of the European Union (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_1886

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