Homepage Sectoral Productivity and Cross-Country Inflation Differentials: Much Ado About Nothing?

Sectoral Productivity and Cross-Country Inflation Differentials: Much Ado About Nothing?

Year & volume: 2002 (VOL. 52) Issue: 11 Pages: 616-617

Authors: Lenka Markova, Jiří Podpiera, Vladislav Flek

JEL classification: E31, F31, O11

Keywords: dual inflation, sectoral productivity, Balassa-Samuelson effect, inflation differentials

Abstract

We find that sectoral productivity developments have a statistically significant impact on relative prices in EU countries and also in the Czech Republic, but the magnitude of the impact is not as strong as the Balassa-Samuelson effect would suggest. The final impact of relative productivity changes on CPI-inflation is even weaker, and is negligible in the case of the Czech Republic.