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Real currency appreciation in accession countries: Balassa-Samuelson and investment demand Author info | Abstract | Publisher info | Download info | Related research | Statistics Fischer, Christoph
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The Balassa-Samuelson effect is usually seen as the prime explanation of the continuous real appreciation of central and east European (CEE) transition countries' currencies against their western counterparts. The response of a small country's real exchange rate to various shocks is derived in a simple model. It is shown that productivity shocks work not only through a Balassa-type supply channel but also through an investment demand channel. Therefore, empirical evidence apparently in favour of Balassa-Samuelson effects may require a re-interpretation. The model is estimated for a panel of CEE countries. The results are consistent with the model, plausibly explain the observed real appreciation and support the existence of the proposed investment demand channel.
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Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number
2002,19.
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Date of creation: 2002Date of revision:
Handle: RePEc:zbw:bubdp1:4184Contact details of provider: Postal: Postfach 10 06 02, 60006 Frankfurt Phone: 0 69 / 95 66 - 34 55 Fax: 0 69 / 95 66 30 77 Email: Web page: http://www.bundesbank.de/ More information through EDIRC
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Keywords: real exchange rate ; Balassa-Samuelson effect ; transition economies ; panel ; Other versions of this item:
Find related papers by JEL classification: C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data F31 - International Economics - - International Finance - - - Foreign Exchange F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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