EconPapers    
Economics at your fingertips  
 

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

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

No 201506, ROME Working Papers from ROME Network

Abstract: We scrutinize the role of capital flows in competitiveness in a set of seven euro-area member countries (Estonia, Greece, Latvia, Lithuania, Portugal, Slovenia, and the Slovak Republic) in the context of real convergence and crisis. A specific focus is on Greece. The paper extends the seminal Balassa-Samuelson model to include international capital markets, placing a particular focus on their impact on national wage policies. Capital flows are assumed to be able to invert the traditional direction of transmission of real wage increases from the tradable sector to the non-tradable sector and to cause real wages to increase beyond productivity increases. The augmented Balassa-Samuelson model is extended to trace cyclical deviations of real exchange rates from the productivity-driven equilibrium path. Panel estimations for the period from 1995 to 2013 show evidence of the Balassa-Samuelson effect if Greece is excluded from the panel. For Greece, this in turn provides evidence in favour of capital inflow-driven real wage increases in excess of productivity increases.

Keywords: Balassa-Samuelson effect; capital inflows; exchange rate regime; inflation; Greece; Latvia; Portugal; panel model; productivity differential; wages (search for similar items in EconPapers)
JEL-codes: E24 F16 F31 F32 (search for similar items in EconPapers)
Date: 2015-06
References: Add references at CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
http://www.rome-net.org/RePEc/rmn/wpaper/rome-wp-2015-06.pdf First version, 2015 (application/pdf)

Related works:
Journal Article: Beyond Balassa and Samuelson: real convergence, capital flows, and competitiveness in Greece (2018) Downloads
Working Paper: Beyond Balassa and Samuelson: Real Convergence, Capital Flows, and Competitiveness in Greece (2015) Downloads
Working Paper: Beyond Balassa and Samuelson: Real convergence, capital flows, and competitiveness in Greece (2015) Downloads
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:rmn:wpaper:201506

Access Statistics for this paper

More papers in ROME Working Papers from ROME Network
Bibliographic data for series maintained by Albrecht F. Michler ().

 
Page updated 2019-08-17
Handle: RePEc:rmn:wpaper:201506