Estimating the Impact of the Balassa-Samuelson Effect in Central and Eastern European Countries: A Revised Analysis of Panel Data Cointegration Tests
AbstractThis paper aims to reassess the contribution of the Balassa-Samuelson effect to the inflation and real exchange rate appreciation using panel data for nine CEECs covering the period ranging from the mid-1990s to the third quarter of 2010. The main idea of this analysis is to answer the question of whether the Global Economic Crisis had a significant impact on the efforts of CEECs to stay on the path of real convergence. The Balassa-Samuelson effect explains less than 1.5 percentage points on average of inflation differential relative to the euro area and around 1 percentage point of the total domestic inflation. The results are robust across the model specification and estimation method. Most of the results point out that the Balassa-Samuelson effect has not changed considerably during the crisis even though it is lower compared to that in the earlier stage of transition (for the period up to 2004).
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Bibliographic InfoPaper provided by National Bank of Serbia in its series Working papers with number 22.
Length: 30 pages
Date of creation: Jul 2012
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Baumol-Bowen effect; Balassa-Samuelson effect; real appreciation; inflation;
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
- O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe
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