CEC5: On The Estimated Size of the Balassa-Samuelson Effect in CEC5 Countries

In this paper we try to give a summary on the importance of the productivity based real appreciation e.g. the Balassa-Samuelson (BS) effect in five Central and Eastern European (CEC5) countries, namely the Czech Republic, Hungary, Poland, the Slovak Republic, and Slovenia. We develop our approach from two directions. Firstly, we try to apply a common simple analytical framework for producing some stylised facts, and obtaining a “guesstimate” of relative price movements due to different sectoral productivity growth rates. Secondly, we try to summarise the econometric evidence available for the countries, both from individual country and panel estimates. It seems clear from the analyses, that both approaches gives a size of the BS effect not exceeding 2% per annum on CPI inflation vis-à-vis Germany. The numbers obtained are somewhat different, that one would conclude from the change in relative prices in the countries considered. This result might be explained by the fact, that the BS hypotheses did not hold exactly in the past, other factors like change in the sectoral wage rates, pricing behaviour and indermediate product prices also contributed to the behaviour of the nontradable and tradable price ratio. As these estimates are based on past data, when productivity differentials were higher than current figures, it is very likely, that as the catch-up goes by, the possible magnitude of the effect will be even smaller. From this one might conclude that real convergence should not necessary danger the fulfilment of the Maastricht Treaty Criteria on inflation.

Weak convergence of Galerkin approximations for fractional elliptic stochastic PDEs with spatial white noise

The numerical approximation of the solution to a stochastic partial differential equation with additive spatial white noise on a bounded domain is considered. The differential operator is assumed to be a fractional power of an integer order elliptic differential operator. The solution is approximated by means of a finite element discretization in space and a quadrature approximation of an integral representation of the fractional inverse from the Dunford-Taylor calculus. For the resulting approximation, a concise analysis of the weak error is performed. Specifically, for the class of twice continuously Fr\'echet differentiable functionals with second derivatives of polynomial growth, an explicit rate of weak convergence is derived, and it is shown that the component of the convergence rate stemming from the stochasticity is doubled compared to the corresponding strong rate. Numerical experiments for different functionals validate the theoretical results.Comment: 22 pages, 1 figur

The components of the real exchange rate in Hungary

This paper provides a statistical analysis of the components of real exchange rate in Hungary for the period 1991-1996. The real exchange rate is decomposed into a tradable and a nontradable rate. The following main conclusions are valid: 1. The Balassa-Samuelson effect, which presumes a real appreciation when productivity in the tradable sector grows faster than in the nontradable sector, is markedly substantiated by the data for Hungary. 2. The homogeneity assumption of the traded sector is not justified by the data. The traded sector defined by the usual statistical terms does not indicate PPP to hold. 3. The relative (common currency) price of the traded sector shows fluctuations driven by changes in the nominal exchange rate. 4. Fluctuations in the relative (common currency) price of the traded sector are larger than fluctuations of relative prices of nontradables in terms of tradables. In other words prices of the traded and non-traded sectors behave similarly to nominal exchange rate shocks: they have similar inertia. 5. A summary conclusion comprising findings of 1-4: for Hungarian data the definition of statistical categories of trading and non-trading sectors are useful in separating industries according to their rate of technological change, but it is much less helpful in separating good substitutes from poor substitutes for internationally traded goods. In section 1 we describe the way we decomposed the real exchange rate. In section 2 we try to explain the determinants of the components, in section 3 we try to arrive to a quantification of the rate of change of the equilibrium real exchange rate in Hungary.

Escape Individually or in Groups: Comparison of the Effectiveness of the Two Organizational Methods

During the COVID epidemic some teachers tried to use educational escape rooms to motivate their students to learn from home. In most cases they had to play alone, but the breakout games were originally played in groups. The aim of this research was to compare the learning effects of individually played educational escape rooms with those which played in groups.  According to the literature there was some uncertainty of the efficiency of this type of game too. The results of this study have shown that escape rooms can be effective learning tools either played alone or in teams. The knowledge of the students was measured right before the escape room, immediately after the game and one month later. Both classes produced significantly better results immediately after both post-tests than on pre-test. This paper also compares the improvements of the two classes. It has been found that the team players’ performance has improved to a significantly greater extent than individual players’. Besides, the significant difference which was measured on the pre-test disappeared after the game in both post-tests. Keywords: Educational Escape Rooms, individually played, team play, feedback, learning effects DOI: 10.7176/JEP/13-30-02 Publication date:October 31st 2022

Determinants of Real Exchange Rate Fluctuations in Hungary

This paper investigates the different sources of real exchange rate fluctuations in Hungary. We consider the effect of tradable pricing behavior and nominal rigidities in tradable real-exchange rate movements, and investigate the importance of relative productivity changes between the tradable and nontradable sector in relative price (nontradable/tradable) adjustments. We formulate a policy reaction function to separate the effect of tradable pricing shocks from policy shocks. The framework we use is a two sector open economy real exchange rate model. Its contemporaneous structure is used for the identification of structural shocks. Since the effect of policy shocks on tradable real exchange rate was not significant, our results suggest that nominal rigidities did not play an important role during the period under consideration. The evolution of nontradable prices and relative (nontradable/tradable) prices were well explained by nontradable output shocks. Thus, the Balassa-Samuelson-effect seems to have been at work in Hungary during the first eight years of transition.