The Balassa-Samuelson effect in 'East & West': Differences and similarities

Arbeitspapier

Based on two detailed Balassa-Samuelson (BS) studies, Wagner and Hlouskova (2004) for eight Central Eastern European countries (CEECs) and Wagner and Doytchinov (2004) for ten Western European countries (WECs), this study assesses the differences and similarities of the BS effect between these two country groups. The econometric results show that the BS effect may have been overestimated in previous studies due to application of inappropriate first generation panel cointegration methods. When appropriately quantified, the BS effect itself explains RER movements respectively inflation differentials only to a small extent. However, extended BS relationships that include additional variables allow for an adequate modelling of inflation. Based on the comparative analysis we draw some conclusions for monetary policy in the future enlarged Euro Area.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Reihe Ökonomie / Economics Series ; No. 180

Classification and Topics

• Classification: Wirtschaft ; International Economic Order and Integration ; Economic Growth and Aggregate Productivity: General ; Comparative Studies of Countries ; Socialist Systems and Transitional Economies: Planning, Coordination, and Reform ; Socialist Systems and Transitional Economies: Performance and Prospects
• Subject: Balassa-Samuelson effect ; Central and Eastern Europe ; Western Europe ; non-stationary panels ; inflation simulations ; Panel ; Kointegration ; Osteuropa ; Westeuropa ; Balassa-Samuelson Effekt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Wagner, Martin
• Event: Veröffentlichung
• (who): Institute for Advanced Studies (IHS)
• (where): Vienna
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/72267
• Last update: 10.03.2025, 11:41 AM CET