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Real Exchange Rate of the Czech Koruna and the Prices of Non-tradable Goods and Services
[Reálný kurz české koruny a ceny mezinárodně neobchodovatelných statků]

Author

Listed:
  • Martin Mandel
  • Vladimír Tomšík

Abstract

The paper presents both theoretical and an empirical analysis of factors influencing the prices of non-tradable goods and services in the Czech economy. The analysis discusses the development of the real exchange rate of the Czech koruna and quantifies the size of the real exchange rate appreciation of the Czech currency in the period 1993-2007 as a result of the domestic price development in the tradable and non-tradable sectors. The paper mathematically derives a relationship between the prices of non-tradable goods and services and the real exchange rate based on a traditional aggregate base. It also defines the basic determinants of the prices of non-tradable goods and services while emphasizing the basic distinctions between these price determinants for non-tradable and tradable goods and services. The econometric part of the paper is based on VAR models, cointegration analysis, and vector error correction models. The empirical verification is carried out with the Czech economic data covering the period 1996-2007.

Suggested Citation

  • Martin Mandel & Vladimír Tomšík, 2008. "Real Exchange Rate of the Czech Koruna and the Prices of Non-tradable Goods and Services [Reálný kurz české koruny a ceny mezinárodně neobchodovatelných statků]," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2008(3), pages 3-12.
    • Handle: RePEc:prg:jnlaop:v:2008:y:2008:i:3:id:89:p:3-12
    DOI: 10.18267/j.aop.89
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    References listed on IDEAS

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    1. Vladislav Flek & Lenka Marková & Jiøí Podpiera, 2003. "Sectoral Productivity and Real Exchange Rate Appreciation: Much Ado about Nothing?," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 53(3-4), pages 130-153, March.
    2. Taylor, Alan M, 2001. "Potential Pitfalls for the Purchasing-Power-Parity Puzzle? Sampling and Specification Biases in Mean-Reversion Tests of the Law of One Price," Econometrica, Econometric Society, vol. 69(2), pages 473-498, March.
    3. Goldberg, Pinelopi K. & Verboven, Frank, 2005. "Market integration and convergence to the Law of One Price: evidence from the European car market," Journal of International Economics, Elsevier, vol. 65(1), pages 49-73, January.
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    6. Tomas Holub & Martin Cihak, 2003. "Price Convergence: What Can the Balassa-Samuelson Model Tell Us?," Working Papers 2003/08, Czech National Bank.
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    More about this item

    Keywords

    Balassa-Samuelson effect; real exchange rate; inflation;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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