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Beyond Balassa - Samuelson: Real Appreciation in Tradables in Transition Countries

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Author Info
Martin Cincibuch
Jiri Podpiera

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Abstract

Using the simple arbitrage model, we decompose real appreciation in tradables in three Central European countries between the pricing-to-market component (disparity) and the local relative price component (substitution ratio). Appreciation is only partially explained by local relative prices. The rest is absorbed by disparity, depending on the size of the no-arbitrage band. The observed disparity fluctuates in a wider band for differentiated products than for a commodity like goods.

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Paper provided by Czech National Bank, Research Department in its series Working Papers with number 2004/09.

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Date of creation: Dec 2004
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Handle: RePEc:cnb:wpaper:2004/09

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Keywords: Purchasing power parity; pricing-to-market; transition; real appreciation; exchange rates;

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F15 - International Economics - - Trade - - - Economic Integration

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. García Solanes, José & Torrejón Flores, Fernando, 2008. "The Balassa-Samuelson Hypothesis in Developed Countries and Emerging Market Economies: Different Outcomes Explained," Economics Discussion Papers 2008-14, Kiel Institute for the World Economy. [Downloadable!]
  2. Ian Babetskii & Balázs Égert, 2005. "Equilibrium Exchange Rate in the Czech Republic: How Good is the Czech BEER?," William Davidson Institute Working Papers Series wp781, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  3. Roman Horváth, 2005. "Real Equilibrium Exchange Rate Estimates: To What Extent Are They Applicable for Setting the Central Parity?," Working Papers IES 75, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2005. [Downloadable!]
  4. Roman Hotvath, 2005. "Real Equilibrium Exchange Rate Estimates: To What Extent Applicable for Setting the Central Parity?," International Finance 0509006, EconWPA. [Downloadable!]
  5. José García-Solanes & Francisco I. Sancho-Portero & Fernando Torrejón-Flores, 2007. "Beyond the Salassa-Samuelson Effect in some New Member States of the European Union," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  6. Jiri Podpiera & Marie Rakova, 2006. "Degree of Competition and Export-Production Relative Prices when the Exchange Rate Changes: Evidence from a Panel of Czech Exporting Companies," Working Papers 2006/10, Czech National Bank, Research Department. [Downloadable!]
  7. Alena Bicakova & Kamil Dybczak & Ales Krejdl & Jiri Slacalek & Michal Slavik, 2007. "CNB Economic Research Bulletin: Fiscal policy and its sustainability," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 2, volume 5, number rb05/2 edited by Ian Babetskii & Vladimir Bezdek. [Downloadable!]
  8. Ondřej Schneider & Jan Zápal, 2005. "Fiscal Policy in New EU Member States: Go East, Prudent Man!," Working Papers IES 76, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2005. [Downloadable!]
    Other versions:
  9. Vit Barta, 2005. "Fulfilment of the Maastricht Inflation Criterion by the Czech Republic: Potential Costs and Policy Options," Research and Policy Notes 2005/04, Czech National Bank, Research Department. [Downloadable!]
  10. Jan Bruha & Jirí Podpiera, 2007. "Transition economy convergence in a two-country model - implications for monetary integration," Working Paper Series 740, European Central Bank. [Downloadable!]
  11. Jan Bruha & Jiri Podpiera & Stanislav Polak, 2007. "The Convergence of a Transition Economy: The Case of the Czech Republic," Working Papers 2007/3, Czech National Bank, Research Department. [Downloadable!]
  12. Ian Babetskii & Ales Bulir & Fabrizio Coricelli & Jan Filacek & Michal Franta & Roman Horvath & Branislav Saxa & Katerina Smidkova, 2008. "CNB Economic Research Bulletin: Ten years of inflation targeting," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 1, volume 6, number rb06/1 edited by Ian Babetskii & Katerina Smidkova. [Downloadable!]
  13. García Solanes, José & Torrejón-Flores, Fernando, 2009. "The Balassa-Samuelson Hypothesis in Developed Countries and Emerging Market Economies: Different Outcomes Explained," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 3(2), pages 1-24. [Downloadable!]
  14. Jan Bruha & Jiri Podpiera, 2007. "Inquiries on dynamics of transition economy convergence in a two-country model," Working Paper Series 791, European Central Bank. [Downloadable!]
  15. Karsten Staehr, 2008. "The Maastricht Inflation Criterion and the New EU Members from Central and Eastern Europe," Bank of Estonia Working Papers 2008-04, Bank of Estonia, revised 30 Oct 2008. [Downloadable!]
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