Estimating the Baumol-Bowen and Balassa-Samuelson Effects in the Polish Economy - a Disaggregated Approach

• Authors: Karolina Konopczak , Andrzej Torój
• Languages of publication: EN

Abstracts

EN

This paper estimates the magnitude of the Baumol-Bowen and Balassa-Samuleson effects in the Polish economy. The purpose of the analysis is to establish to what extent the differential price dynamics in Poland and in the euro area and the real appreciation of PLN against EUR are explained by the differential in respective productivity dynamics. The historical contribution of the Baumol-Bowen effect to Polish inflation rate is estimated at 0:9 - 1:0 percentage points in the short run. According to estimation results, the Balassa-Samuelson effect contributed around 0:9 to 1:0 percentage point per annum to the rate of relative price growth between Poland and the euro area and 1:0 to 1:2 p.p. to real exchange rate appreciation. The long-run effects are of an approximately twice larger magnitude. Sub-sample calculations and productivity trends over the last decade suggest that this impact should be declining. However, its size is still non-negligible for policymakers in the context of euro adoption in Poland.

Keywords

EN

Balassa-Samuelson hypothesis; monetary integration; real appreciation; panel cointegration

• Publisher: Polska Akademia Nauk Oddział w Łodzi
• Journal: Central European Journal of Economic Modelling and Econometrics
• Year: 2010
• Volume: 2
• Issue: 2
• Pages: 117-150

Dates

received

2010-08-09

accepted

2011-01-30

Contributors

author

Karolina Konopczak

• Polish Ministry of Finance and Institute for Market, Consumption and Business Cycles Research,

author

Andrzej Torój

• Polish Ministry of Finance,