The Balassa-Samuelson Effect in Romania
This paper aims to provide estimates of the the Balassa-Samuelson effect in Romania – the extent to which differences in productivity growth between tradables and nontradables industries explain the observed differences in inflation between Romania and the euro area. The Balassa-Samuelson effect has major implications for interpretation of the inflation and the exchange rate criteria for European Monetary Union membership. The conclusion is that the Balassa-Samuelson effect explains only marginally the observed inflation differential. Unlike previous studies which estimated higher values for this effect, this paper considers the productivity differential of each sector and the weight of the tradables sector in Romania in relation to the Euro Area. The results show that there is very unlikely that the productivity differential endangers the nominal convergence criterions.
Volume (Year): (2010)
Issue (Month): 4 (December)
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References listed on IDEAS
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- Canzoneri, Matthew B. & Cumby, Robert E. & Diba, Behzad, 1999.
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- Balázs Égert & Imed Drine & Kirsten Lommatzsch & Christophe Rault, 2005. "The Balassa-Samuelson Effect in Central and Eastern Europe: Myth or Reality?," Documents de recherche 05-15, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
- Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584-584.
- Egert, Balazs, 2002. "Estimating the impact of the Balassa-Samuelson effect on inflation and the real exchange rate during the transition," Economic Systems, Elsevier, vol. 26(1), pages 1-16, April. Full references (including those not matched with items on IDEAS)
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