Balassa-Samuelson, product differentiation and transition

Autor*innen

• Richard Frensch

Parameter

• Wirtschaft

Mehr zum Buch

Recent panel studies have found relatively high estimates for the elasticity of real exchange rates with respect to productivity measures in transition economies within Balassa Samuelson frameworks. This contrasts with other findings reporting crosssection priceincome elasticity estimates to depend positively on average income in the sample. This paper aims to reconcile both results by putting real exchange rate developments of transition economies in an international perspective. We illustrate the special status of these economies in a simple worldwide BalassaSamuelsontype priceincome benchmark relationship between a real exchange rate measure (Penn World Table comparative prices, i.e., exchange rate gaps) and PPPadjusted per capita income. A pronounced undervaluation at the start of transition, followed by a strong appreciation results in normalisation towards the benchmark for Central and East European economies (CEEC) but not for the CIS. We then make an attempt at extending the simple priceincome relationship to incorporate other real factors as well as reforms related to price deregulation. Our results imply that, when accounting for demand shifts, external liberalisation, and especially for reform effort, the priceincomeelasticity for CEEC economies was not different from that of nontransition economies during the nineties. BalassaSamuelson ; transition

• Sprache: Englisch
• Erscheinungsdatum: 2006