Balassa-Samuelson Meets South Eastern Europe, the CIS and Turkey: A Close Encounter of the Third Kind?
AbstractThis paper investigates the importance of the Balassa-Samuelson effect for two acceding countries (Bulgaria and Romania), two accession countries (Croatia and Turkey) and two CIS countries (Russia and Ukraine). The paper first studies the basic assumptions of the Balassa-Samuelson effect using yearly data, and then undertakes an econometric analysis of the assumptions on the basis of monthly data. The results suggest that for most of the countries, there is either amplification or attenuation, implying that any increase in the open sector’s productivity feeds onto changes in the relative price of non-tradables either imperfectly or in an over-proportionate manner. With these results as a background, the size of the Balassa-Samuelson effect is derived. For this purpose, a number of different sectoral classification schemes are used to group sectors into open and closed sectors, which makes a difference for some of the countries. The Balassa-Samuelson effect is found to play only a limited role for inflation and real exchange rate determination, and it seems to be roughly in line with earlier findings for the eight new EU member states of Central and Eastern Europe.
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Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp796.
Date of creation: 01 Nov 2005
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Balassa-Samuelson effect; productivity; inflation; real exchange rate; transition; South Eastern Europe; CIS; Turkey;
Other versions of this item:
- Balázs Égert, 2005. "Balassa-Samuelson Meets South Eastern Europe, the CIS and Turkey: A Close Encounter of the Third Kind?," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 2(2), pages 221-243, December.
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- P17 - Economic Systems - - Capitalist Systems - - - Performance and Prospects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-06-10 (All new papers)
- NEP-CBA-2006-06-10 (Central Banking)
- NEP-CWA-2006-06-10 (Central & Western Asia)
- NEP-EEC-2006-06-10 (European Economics)
- NEP-IFN-2006-06-10 (International Finance)
- NEP-MAC-2006-06-10 (Macroeconomics)
- NEP-MON-2006-06-10 (Monetary Economics)
- NEP-TRA-2006-06-10 (Transition Economics)
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