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Harrod, Balassa and Samuelson (Re)Visit Eastern Europe

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Author Info

  • Robert J. Sonora

    ()
    (Department of Economics, School of Business Administration, Fort Lewis College)

  • Josip Tica

    ()
    (Faculty of Economics and Business, University of Zagreb)

Abstract

In this paper we investigate Harrod Balassa Samuelson (HBS) effect in 11 transition countries. A large number of empirical papers based on quite limited datasets has already been published on HBS in Eastern Europe. The major contribution of this paper is the fact that we estimate HBS with NACE6 quarterly national account data which enables us to divide data into tradable and nontradable sector as suggested by De Gregorio, Giovannini and Wolf (1994) without any unrealistic assumptions. Following Bergstrand (1991) together with relative productivity we also employ share of government consumption in GDP as an explanatory variable. Unlike in previous studies, results have indicated that it is possible to find univariate cointegrating vectors only in Bulgaria, Croatia and Lithuania, and panel cointegration test has indicated that it is possible to find strong evidence of cointegration in post 2000 sample. For the post 1995 period, rejection of the null hypothesis is dependent on the inclusion of government consumption as independent variable and methodology used (DOLS vs. OLS cointegration test).

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Bibliographic Info

Paper provided by Faculty of Economics and Business, University of Zagreb in its series EFZG Working Papers Series with number 0907.

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Length: 20
Date of creation: 24 Jun 2009
Date of revision:
Handle: RePEc:zag:wpaper:0907

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Related research

Keywords: Harrod Balassa Samuelson effect; Price convergence; Transition countries; panel cointegration tests;

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References

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  1. Peter C.B. Phillips & Hyungsik R. Moon, 1999. "Nonstationary Panel Data Analysis: An Overview of Some Recent Developments," Cowles Foundation Discussion Papers 1221, Cowles Foundation for Research in Economics, Yale University.
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  7. Vladislav Flek & Lenka Markova & Jiri Podpiera, 2002. "Sectoral Productivity and Real Exchange Rate Appreciation: Much Ado about Nothing?," Working Papers 2002/04, Czech National Bank, Research Department.
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Cited by:
  1. 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.
  2. 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.

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