Estimating the Impact of the Balassa-Samuelson Effect on Inflation and the Real Exchange Rate During the Transition 6/03 Too Old to Publish, Dana

In this paper, we investigate whether the Balassa-Samuelson (B-S) effect holds for the Czech Republic, Hungary, Poland, Slovakia and Slovenia during the transition process. The co-integration analysis suggests that the importance of the B-S effect does differ across countries. Generally, we can establish long-term co-integration relationships between productivity growth and relative prices while the link between relative prices and the RER turns out to be weaker. We seek to calculate the extent to which the B-S effect may influence inflation and the real exchange rate and subsequently discuss policy implications