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On the Differences in Price Levels between the Czech Republic and Germany

Author

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  • Michal Skoøepa

Abstract

According to the results of the International Comparison Project, based on exchange rates and prices recorded in 1996, prices in the Czech Republic (CR) were markedly lower than prices charged for many comparable products and services in the European Union. This observation led some commentators to conclude that there is price tension between the two economies and that the CR?s entry into the EU will cause a price shock in the CR unless every effort is made to raise the CR?s comparative price level in advance. This line of thinking wrongly assumes that the CR?s entry into the EU will necessarily equalize Czech and EU prices. The article, focusing on a comparison with Germany, lists several reasons why such a shock is not a certainty and also cites some of the more important price pressures that are likely to influence Czech price level during the country?s accession to the EU.

Suggested Citation

  • Michal Skoøepa, 2001. "On the Differences in Price Levels between the Czech Republic and Germany," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 51(6), pages 363-375, June.
    • Handle: RePEc:fau:fauart:v:51:y:2001:i:6:p:363-375
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    More about this item

    Keywords

    comparative price level; tradable and non-tradable goods; law of one price;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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