Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71235
Authors: 
Lojschová, Adriana
Year of Publication: 
2003
Series/Report no.: 
Reihe Ökonomie / Economics Series, Institut für Höhere Studien (IHS) 140
Abstract: 
The Balassa-Samuelson (BS) effect is usually considered as the prime explanation of the continuous real exchange rate appreciation of the central and east European (CEE) transition countries against their western European counterparts. This paper tries to explain relative price differentials observed over the past decade between four CEE economies - Slovakia, the Czech Republic, Hungary and Poland - and Euro area in terms of productivity growth differentials. Using panel estimation techniques, we find strong empirical evidence in favour of the BS hypothesis. Furthermore, relaxing some of the assumptions (i.e. PPP holds for tradable goods) results in little support of BS hypothesis. Our estimates of the BS term suggest that the Balassa-Samuelson effect in these 4 CEE countries does not have to be as sizeable as other studies propose.
Subjects: 
Balassa-Samuelson effect
Purchasing Power Parity (PPP)
real exchange rate appreciation
transition economies
JEL: 
E31
F31
C23
Document Type: 
Working Paper

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