Estimating the Baumol-Bowen and Balassa-Samuelson effects in the Polish economy -- a disaggregated approach
AbstractThis paper estimates the magnitude of the Baumol-Bowen and Balassa-Samuleson effects in the Polish economy. The purpose of the analysis is to establish to what extent the differential price dynamics in Poland and in the euro area and the real appreciation of PLN against EUR are explained by the differential in respective productivity dynamics. The historical contribution of the Baumol-Bowen effect to Polish inflation rate is estimated at 0.7-1.0 percentage points in the short run. According to estimation results, the Balassa-Samuelson effect contributed around 0.9 to 1.3 percentage point per annum to the rate of relative price growth between Poland and the euro area and 0.9 to 1.6 p.p. to real exchange rate appreciation. Sub-sample calculations and productivity trends over the last decade suggest that this impact should be declining. However, its size is still non-negligible for policymakers in the context of euro adoption in Poland.
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Bibliographic InfoPaper provided by Ministry of Finance in Poland in its series Working Papers with number 6.
Length: 42 pages
Date of creation: 27 Sep 2010
Date of revision:
Balassa-Samuelson hypothesis; monetary integration; real appreciation; panel cointegration;
Other versions of this item:
- Karolina Konopczak & Andrzej Torój, 2010. "Estimating the Baumol-Bowen and Balassa-Samuelson Effects in the Polish Economy - a Disaggregated Approach," Central European Journal of Economic Modelling and Econometrics, CEJEME, vol. 2(2), pages 117-150, March.
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-09 (All new papers)
- NEP-EEC-2010-10-09 (European Economics)
- NEP-OPM-2010-10-09 (Open Economy Macroeconomic)
- NEP-TRA-2010-10-09 (Transition Economics)
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