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Does the Productivity-Bias Hypothesis Hold in the Transition? Evidence from Five CEE Economies in the 1990s


  • Balázs Égert


The validity of the Balassa-Samuelson effect seems to be something of a stylized fact for transition countries. This article addresses the question as to whether the productivity bias hypothesis holds for the Czech Republic, Hungary, Poland, Slovakia, and Slovenia between 1991 and 2000. In so doing, vector autoregression model-based (VAR) cointegration analysis is employed. The results are rather varied and suggest that the Balassa-Samuelson effect is not of the same importance for each country. Generally, we find long-term cointegration relationships between productivity growth and relative prices while the link between relative prices and the real exchange rate is found to be much weaker.We then determine the extent to which the Balassa-Samuelson effect may influence inflation and real exchange rates during transition.

Suggested Citation

  • Balázs Égert, 2002. "Does the Productivity-Bias Hypothesis Hold in the Transition? Evidence from Five CEE Economies in the 1990s," Eastern European Economics, Taylor & Francis Journals, vol. 40(2), pages 5-37, March.
  • Handle: RePEc:mes:eaeuec:v:40:y:2002:i:2:p:5-37

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    References listed on IDEAS

    1. Claessens, Stijn & Kingebiel, Daniela & Schmukler, Sergio L., 2002. "Explaining the Migration of Stocks from Exchanges in Emerging Economies to International Centres," WIDER Working Paper Series 094, World Institute for Development Economic Research (UNU-WIDER).
    2. Marco Pagano & Ailsa A. Röell & Josef Zechner, 2002. "The Geography of Equity Listing: Why Do Companies List Abroad?," Journal of Finance, American Finance Association, vol. 57(6), pages 2651-2694, December.
    3. Pagano, Marco & Randl, Otto & Roell, Ailsa A. & Zechner, Josef, 2001. "What makes stock exchanges succeed? Evidence from cross-listing decisions," European Economic Review, Elsevier, vol. 45(4-6), pages 770-782, May.
    4. Guercio, Diane Del & Hawkins, Jennifer, 1999. "The motivation and impact of pension fund activism," Journal of Financial Economics, Elsevier, vol. 52(3), pages 293-340, June.
    5. Gaa, Charles & Stephen Lumpkin & Robert Ogrodnik & Peter Thurlow, 2001. "The Future Prospects for National Financial Markets and Trading Centres," Staff Working Papers 01-10, Bank of Canada.
    6. Pietro Garibaldi & Nada Mora & Ratna Sahay & Jeromin Zettelmeyer, 2001. "What Moves Capital to Transition Economies?," IMF Staff Papers, Palgrave Macmillan, vol. 48(4), pages 1-6.
    7. Schmiedel, Heiko, 2001. "Technological development and concentration of stock exchanges in Europe," Research Discussion Papers 21/2001, Bank of Finland.
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    Cited by:

    1. Kemme, David M. & Roy, Saktinil, 2006. "Real exchange rate misalignment: Prelude to crisis?," Economic Systems, Elsevier, vol. 30(3), pages 207-230, October.
    2. Altar, Moisa & Albu, Lucian Liviu & Dumitru, Ionut & Necula, Ciprian, 2009. "Evidences of the Intensity of the Balassa-Samuelson Phenomenon in the Romanian Economy," Working Papers of National Institute of Economic Research 090106, National Institute of Economic Research.

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