Beyond Balassa and Samuelson: Real Convergence, Capital Flows, and Competitiveness in Greece

Ansgar Belke, Ulrich Haskamp (), Gunther Schnabl and Holger Zemanek

No 5557, CESifo Working Paper Series from CESifo

Abstract: We scrutinize the role of capital flows for competitiveness in seven euro-area countries in the context of real convergence and crisis with a specific focus on Greece. The paper extends the seminal Balassa-Samuelson model to include international capital markets. Capital flows are assumed to be able to invert the traditional direction of transmission of real wage increases from the tradable to the non-tradable sector and to cause real wages to increase beyond productivity increases. Panel estimations for the period from 1995 to 2013 show evidence in favour of capital inflow-driven real wage increases in excess of productivity increases in Greece.

Keywords: Balassa-Samuelson effect; capital inflows; exchange rate regime; inflation; Estonia; Greece; Latvia; Lithuania; Portugal; Slovenia; Slovak Republic; panel model; productivity differential; wages (search for similar items in EconPapers)
JEL-codes: E24 F16 F31 F32 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Beyond Balassa and Samuelson: real convergence, capital flows, and competitiveness in Greece (2018)
Working Paper: Beyond Balassa and Samuelson: Real Convergence, Capital Flows, and Competitiveness in Greece (2015)
Working Paper: Beyond Balassa and Samuelson: Real convergence, capital flows, and competitiveness in Greece (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_5557

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