The Harrod-Balassy-Samuelson Effect in Poland and Other Central and Eastern European Countries

The Harrod-Balassy-Samuelson Effect in Poland and other Central and Eastern European Countries was a subject of research undertaken by a team led by Przemysław Woźniak. The Harrod-Balassy-Samuelson effect explains why countries with rapidly growing productivity in the tradable goods sector (relative to sectors producing goods which are not tradable), can have systematically higher inflation. The developed model helps to explain the appreciation in real terms of exchange rates, in which productivity growth is higher than abroad.  The Effect can be particularly useful in the analysis of inflation and the real exchange rate in Poland and in the other CEFTA members as well as in the Baltic countries. The results of the project were published in CASE Report No. 57 entitled The HBS Effect in Selected Central and Eastern European Countries. The authors confirmed the existence of inflationary pressure and (to a lesser extent), appreciatory pressure related to the HBS Effect in the countries studied, and added to it estimates of the scale of inflation and appreciation in the period 1996-2003. The study contains a new development in the literature about the potential effect of exchange rate regimes on the presence and strength of the HBS effect.

Project's participants were: Przemyslaw Wozniak, (coordinator), Monika Blaszkiewicz, Przemyslaw Kowalski and Lukasz Rawdanowicz. The Committee for Scientific Research was a sponsor of a project.