Suchergebnisse

We examine the evolution of nontradable and tradable prices in the Indian economy over 1980-2002 and find widening differentials: the real exchange rate has been appreciating. This might seem unsurprising, since India's rapid per capita income growth suggests Balassa-Samuelson factors at play. However, after 1990, the tradable-nontradable labor productivity gap, the driver of real appreciation according to Balassa-Samuelson, virtually disappeared. So what explains the real appreciation? Assessing the role of both demand and supply factors, we find that demand pressures arising from higher inco

AbstractWe decompose real appreciation in tradables derived from producer price indexes in three Central European countries between the pricing‐to‐market component (disparity) and the local relative price component (the substitution ratio). Appreciation is only partially explained by local relative prices. The rest is absorbed by disparity, depending on the size of the no‐arbitrage band. The observed disparity fluctuates in a wider band for differentiated products than for commodity like goods.

The Government of Algeria has pursed a relatively expansionary fiscal policy in recent years, thanks to rising oil prices and revenues. The paper explores the potential effects of such a stance on real exchange rate and uncovers a relatively small appreciating effect of increased government capital expenditure. This is explained by the fact that a significant share of capital spending falls into tradable imported goods. However, the envisaged increase in capital spending, if well designed and implemented, might in the long-run translate into rising operations and maintenance expenditure-mostly

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The Government of Algeria has pursed a relatively expansionary fiscal policy in recent years, thanks to rising oil prices and revenues. The paper explores the potential effects of such a stance on real exchange rate and uncovers a relatively small appreciating effect of increased government capital expenditure. This is explained by the fact that a significant share of capital spending falls into tradable imported goods. However, the envisaged increase in capital spending, if well designed and implemented, might in the long-run translate into rising operations and maintenance expenditure—mostly nontradable goods—thereby causing a higher real appreciation. This implies that Algeria should carefully consider the implications of its public investment program on recurrent expenditure.

The Government of Algeria has pursed a relatively expansionary fiscal policy in recent years, thanks to rising oil prices and revenues. The paper explores the potential effects of such a stance on real exchange rate and uncovers a relatively small appreciating effect of increased government capital expenditure. This is explained by the fact that a significant share of capital spending falls into tradable imported goods. However, the envisaged increase in capital spending, if well designed and implemented, might in the long-run translate into rising operations and maintenance expenditure—mostly nontradable goods—thereby causing a higher real appreciation. This implies that Algeria should carefully consider the implications of its public investment program on recurrent expenditure.

The paper analyses how equilibrium adjustments of the wage rate affect the scope for tax rate reductions when the government experiences an exogenous increase in non-tax revenues. It shows within a stylized model that increased revenue in the form of a tradable will increase the wage rate, which diminishes the scope for tax rate reduction, provided that the initial wage dependent government net expenditures are positive. In this case the wage rate adjustment represents an automatic channel for redistributing increased non-tax government revenues. When the revenue increases in the form a non-tradable, the wage rate adjustment reinforces the scope for tax rate reduction. Simulations on a CGE model of the Norwegian economy confirm the theoretical results, and demonstrate that the fiscal wage effect can be strikingly large.

Since the start of transition, the currencies of most East European countries have experienced an abrupt real depreciation, followed by a trend real appreciation over the subsequent years. Within the framework of a panel-data study for eight Central European transition countries - Hungary, the Czech Republic, Poland, Slovakia, Slovenia, Bulgaria, Romania, and Croatia - over a period of up to 12 years, we attempt to explain their real exchange rate movements against the ECU/euro. Theory suggests that in the medium and long run, real exchange rate movements can only be explained by real shocks, such as the shifts in tastes and technology. We construct a model decomposing real exchange rate movements into two components the changing relative price of tradables (the shifts in terms of trade, reflecting the quality upgrading of the countries' exports) and the changing relative price of non-tradables, relating the latter variable to cross-sectoral productivity differentials (capturing presumably the so-called Balassa-Samuelson effect). Our findings suggest that not only the tradable sector productivity and the share of government in GDP, but also the terms of trade are significant determinants of the real exchange rate. However, controlling for sectoral productivities, we found no positive correlation between real exchange rate and per capita GDP, suggesting the relative unimportance of demand effects associated with rising income. The latter finding implies that the trend real appreciation in the countries involved (i.e. higher domestic inflation under a fixed exchange rate arrangement within the framework of monetary integration with the EU) may prove more pronounced than usually assumed due to the possible demand-driven component, as living standards and consumption patterns in transition economies are expected to converge to those currently observed in West European countries.