In this paper we present an overview of a number of issues relating to the equilibrium exchange rates of transition economies of the former soviet bloc. In particular, we present a critical overview of the various methods available for calculating equilibrium exchange rates and discuss how...

The objective of the paper is to analyse the nominal and real convergence process in Estonia drawing on the Balassa-Samuelson (B-S) framework. A 15-sectoral breakdown for GDP and a 5-digit level CPI data disaggregation with over 260 items is used for the period 1993:Q1 to 2002:Q1 to show that...

We study the behavior of real exchange rates in a two-country dynamic equilibrium model. In this model, consumers can only consume domestic goods but can invest costlessly in capital stocks of both countries. Nevertheless, transporting goods between the two countries is costly and, hence, the...

Using long-span data on the dollar-sterling and dollar-franc real exchange rates over the past two centuries, we apply the findings of various strands of the recent literature in order to examine the statistical and economic significance of the Harrod-Balassa-Samuelson effect (the effect of...

This paper studies the Balassa-Samuelson effect in 9 CEECs . Using panel cointegration techniques, we find strong empirical evidence in favour of what we call the internal transmission mechanism since productivity growth in the open sector is found to bring about non-tradable inflation. However,...

This paper examines the long-run validity of purchasing power parity (PPP) for fourteen developing countries. The period examined is 1973:4 through 2002:8. The methods of Elliot, Rothemberg and Stock (1996), Kwiattkowski et al. (1992) and Geweke and Porter-Hudak (1983) are employed to detect the...

Finding evidence of the theoretical relationship between exchange rate and inflation has been a difficult proposition in an exchange rate market, despite many studies in developed markets. Three recent papers employing a new research design, Theil’s Divisia index method, found that this...

This Study addressed the inflation accountingproblem with respect to Greece. This problem had been unaddressed despite the serious implications it may have on micro- and macro-decision making due to the high andpersistent inflation Greece has sustained from 1973 and afterwards.To accomplish the...

According to the Purchasing Power Parity {(PPP)} theory, real exchange rate fluctuations are mainly caused by transitory shocks. The theory fits well one empirical feature of the data, namely the short-run volatility of real exchange rates, but also implies that shocks should die away in one to...

Since the advent of managed floating it has come to be accepted as a stylized fact that short-run deviations from purchasing power parity are both substantial and persistent. Two explanations of these deviations have been advanced in the literature. One emphasizes the role of changes in...