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The Balassa-Samuelson Effect in Romania

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  • Dedu, Vasile

    ()
    (Academy of Economic Studies, Bucharest)

  • Dumitrescu, Bogdan Andrei

    ()
    (Academy of Economic Studies, Bucharest)

Abstract

This paper aims to provide estimates of the the Balassa-Samuelson effect in Romania – the extent to which differences in productivity growth between tradables and nontradables industries explain the observed differences in inflation between Romania and the euro area. The Balassa-Samuelson effect has major implications for interpretation of the inflation and the exchange rate criteria for European Monetary Union membership. The conclusion is that the Balassa-Samuelson effect explains only marginally the observed inflation differential. Unlike previous studies which estimated higher values for this effect, this paper considers the productivity differential of each sector and the weight of the tradables sector in Romania in relation to the Euro Area. The results show that there is very unlikely that the productivity differential endangers the nominal convergence criterions.

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Bibliographic Info

Article provided by Institute for Economic Forecasting in its journal Romanian Journal for Economic Forecasting.

Volume (Year): (2010)
Issue (Month): 4 (December)
Pages: 44-53

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Handle: RePEc:rjr:romjef:v::y:2010:i:4:p:44-53

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Related research

Keywords: Balassa-Samuelson effect; productivity differential; inflation differential; nominal convergence;

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References

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  1. Balázs Égert & Imed Drine & Kirsten Lommatzsch & Christophe Rault, 2005. "The Balassa-Samuelson Effect in Central and Eastern Europe: Myth or Reality?," Documents de recherche 05-15, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
  2. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
  3. Canzoneri, Matthew B & Cumby, Robert & Diba, Behzad, 1996. "Relative Labour Productivity and the Real Exchange Rate in the Long Run: Evidence for a Panel of OECD Countries," CEPR Discussion Papers 1464, C.E.P.R. Discussion Papers.
  4. Egert, Balazs, 2002. "Estimating the impact of the Balassa-Samuelson effect on inflation and the real exchange rate during the transition," Economic Systems, Elsevier, vol. 26(1), pages 1-16, April.
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Cited by:
  1. Mirjana Miletić, 2012. "Estimating the Impact of the Balassa-Samuelson Effect in Central and Eastern European Countries: A Revised Analysis of Panel Data Cointegration Tests," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 59(4), pages 475-499, September.
  2. Mirjana Miletic, 2012. "Estimating the Impact of the Balassa-Samuelson Effect in Central and Eastern European Countries: A Revised Analysis of Panel Data Cointegration Tests," Working papers 22, National Bank of Serbia.

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