Catching-up and inflation in transition economies: the Balassa-Samuelson effect revisited

Dubravko Mihaljek () and Marc Klau

No 270, BIS Working Papers from Bank for International Settlements

Abstract: This paper estimates the Balassa-Samuelson effects for 11 countries in central and eastern Europe on a disaggregated set of quarterly data covering the period from the mid-1990s to the first quarter of 2008. The Balassa-Samuelson effects are clearly present and explain around 24% of inflation differentials vis-à-vis the euro area (about 1.2 percentage points on average); and around 84% of domestic relative price differentials between non-tradables and tradables; or about 16% of total domestic inflation (about 1.1 percentage points on average). The paper presents mixed evidence on whether the Balassa-Samuelson effects have declined since 2001 compared with the second half of the 1990s.

Keywords: Balassa-Samuelson effect; productivity; inflation; transition; convergence; European monetary union; Maastricht criteria (search for similar items in EconPapers)
Pages: 26 pages
Date: 2008-12
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac, nep-mon, nep-opm and nep-tra
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Citations: View citations in EconPapers (35)

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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:270

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