Growth, Nontradables, and Price Convergence in the Baltics

April 1, 1995

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Format: Chicago

Anthony J. Richards, and Gunnar Tersman. Growth, Nontradables, and Price Convergence in the Baltics, (USA: International Monetary Fund, 1995) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper reviews the recent real exchange rate appreciation observed in the three Baltic countries. Until now, this phenomenon may be viewed primarily as a consequence of the undervalued real exchange rates of the new currencies. Looking ahead, a tendency for continued real appreciation is to be expected as part of the transition process toward higher income levels, due in part to differential productivity growth rates in the tradable and nontradable sectors. In the absence of an appreciation of the nominal exchange rate, this real appreciation will occur through inflation rates that are higher than in industrial countries. Provided that the current prudent economic policies are continued, such higher inflation will not threaten macroeconomic objectives and may indeed be viewed as an indication that the transition process is progressing as expected.

Subject: Conventional peg, Foreign exchange, Income, Inflation, National accounts, Prices, Production, Productivity, Real exchange rates

Keywords: Baltics, Conventional peg, Credit policy, Current price, Goods, Income, Inflation, Inflation rate, Nontradable goods sector, Northern Europe, Price, Price level, Productivity, Rate of inflation, Real exchange rates, WP

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1995/045
Stock No:

WPIEA0451995
ISBN:

9781451974317
ISSN:

1018-5941

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