Inflation and Productivity Differentials in EMU

Skudelny, Frauke

doi:10.1007/978-1-4757-3598-7_4

Cited by 16 publications

(11 citation statements)

References 18 publications

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“…Our basic version of the Balassa‐Samuelson model is a two‐country model, with a tradable goods (industry) sector and a non‐tradable goods (services) sector, as described by De Grauwe and Skudelny (2002). We assume perfect competition in the tradable goods markets and perfect mobility in the national labour markets – but no labour mobility between the two countries.…”

Section: The Balassa‐samuelson Effect With Respect To Emu Accessionmentioning

confidence: 99%

Nominal Versus Real Convergence – EMU Entry Scenarios for the New Member States

Grauwe

Schnabl

2005

Kyklos

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This paper explores the conflict of real and monetary convergence during the EMU run-up of the Central and Eastern European member states. Using a Balassa-Samuelson model of productivity driven inflation, we find a high probability of higher inflation in the new member states. We compare the policy options which make the compliance possible, i.e. fiscal tightening and nominal appreciation within the ERM2 band. Nominal appreciation within ERM2 seems the better option to achieve the compliance with the Maastricht criteria, as no discretionary government intervention is necessary, and losses in terms of real growth are smaller. Having once opted for nominal appreciation by fixing the ERM2 entry rate as the central rate (Irish model), a high degree of flexibility is provided in coping with erratic short-term capital inflows. The strategy of setting the ERM2 entry rate above the central rate (Greek model) implies a clear exchange rate path within ERM2 and thereby less exchange rate volatility. Despite the merits of nominal appreciation, countries committed to hard euro pegs, or with high budget deficits, may choose fiscal contraction as a solution. Copyright 2005 Blackwell Publishing Ltd..

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Section: The Balassa‐samuelson Effect With Respect To Emu Accessionmentioning

confidence: 99%

Nominal Versus Real Convergence – EMU Entry Scenarios for the New Member States

Grauwe

Schnabl

2005

Kyklos

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“…Unlike DeGrauwe and Skudelny (2000), whose time series span the period 1970-1995, we view the closeness of the period examined to the presence as being more important than the length of the time series given structural breaks and the limited comparability of data as one goes further back in time.…”

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confidence: 97%

Euro-Area Inflation: does the Balassa–Samuelson effect matter?

Lommatzsch

Tober²

2006

IEEP

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“…() collects estimates for that part of inflation that can directly be related to the Balassa‐Samuelson with data samples covered by the different papers ranging from 1960 to 2002. For Ireland, the average estimate is 2.6 per cent, for Spain 1.9 per cent, for Italy and Greece it is 1.9 and 1.7 per cent, respectively, and for Portugal the estimate is as low as 0.8 per cent (see also De Grauwe and Skudelny, ). This indicates that a fraction of inflation rates is accounted for by the Balassa‐Samuelson effect and can thus be assumed to soften the growth‐harming effect of high inflation.…”

Section: Inflation and Growth In Europe: An Empirical Analysismentioning

confidence: 97%

Economic Growth and Inflation in Europe: A Tale of Two Thresholds

Cuaresma

Silgoner

2013

J of Common Market Studies

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This article reassesses the impact of inflation on long‐term growth for a panel of 14 European Union countries in the years prior to monetary unification. While previous research mostly focuses on a linear nexus or allows for a piecewise linear relationship with a single threshold, this study takes account of a more complex relationship. The empirical estimates for the full EU sample confirm the hypothesis that the relationship between inflation and growth is positive for very low inflation rates (that is, below an estimate of 1.6 per cent), insignificant thereafter and negative for high, two‐digit inflation levels. The estimate of the inflation level that divides the insignificant from the negative effect is found to be higher in the group of traditional cohesion countries than for the rest of the sample.

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Inflation and Productivity Differentials in EMU

Cited by 16 publications

References 18 publications

Nominal Versus Real Convergence – EMU Entry Scenarios for the New Member States

Nominal Versus Real Convergence – EMU Entry Scenarios for the New Member States

Euro-Area Inflation: does the Balassa–Samuelson effect matter?

Economic Growth and Inflation in Europe: A Tale of Two Thresholds

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