jaromír Šindel eces real and nominal convergence process - different methods of comparison the...
TRANSCRIPT
Jaromír Šindel
ECES
Real and Nominal Convergence Process
-Different Methods of Comparison
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
Topics• International Comparison
– Purchasing parity concept, …
• CEE countries and European Union– Importance of CEEC, desegregation of GDP,
…
• Alternative measure– Process of the real appreciation of national
currency, …
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
Internatinal Comparison – PPP Concept• PPP
• Comparative Price Level
• Exchange Rate Deviation Index
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
Real and Nominal Convergence
Source: OECD: Purchasing Power Parities and Real Expenditures 2002 BENCHMARK YEAR, 2005.
GPD per capita (in PPP $) and Comparative Price Level (OECD 30 = 100) in 2002
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
GDP growth - Slovakia
Source: www.sme.sk
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
Real and Nominal Convergence
Source: OECD: Purchasing Power Parities and Real Expenditures 2002 BENCHMARK YEAR, 2005.
PPP Development in Vysegrad Countries
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
Real convergence process GDP per capita in PPS (EU-12 = 100)
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
eSource: Ministry of Finance, Czech Republic. 2005
Portugal
Slovenia
Slovakia
Poland
Greece
Czech R.
Hungary
Nominal convergence process GDP per capita in euro (EU-12 = 100)
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
eSource: Ministry of Finance, Czech Republic. 2005
Portugal
Slovenia
Slovakia
Poland
Greece
Czech R.
Hungary
Comparative Price Level Comparative price level development
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
eSource: Ministry of Finance, Czech Republic. 2005
Portugal
Slovenia
Slovakia
Poland
Greece
Czech R.
Hungary
Real and Nominal Convergence
Source: OECD: Purchasing Power Parities and Real Expenditures 2002 BENCHMARK YEAR, 2005.
GPD per capita (in PPP $) and Comparative Price Level (OECD 30 = 100)
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
PPP and Exchange rate comparison
Source: Vintrová, R.: Co neodhaluje HDP při analýze ek. růstu a reálné konvergence. Working Paper CES VŠEM No. 1/2005
Average wage in comparison with Austria in 2003 – which columns are in exchange rate terms and which one in PPP?
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
EUR Austria = 100 EUR (PPP) Austria = 100
Czech Rep. 531 21 994 43
Hungary 541 22 968 41
Poland 497 20 1 006 43
Slovakia 346 14 719 31
Slovenia 1 083 43 1 443 62
Estonia 430 17 751 32
Latvia 298 12 620 27
Lithunia 311 12 645 28
Austria 2 499 100 2377 100
International Comparison in 2002
Source: OECD: Purchasing Power Parities and Real Expenditures 2002 BENCHMARK YEAR, 2005.
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
International Comparison in 2002
Source: OECD: Purchasing Power Parities and Real Expenditures 2002 BENCHMARK YEAR, 2005.
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
International Comparison in 1999
Source: OECD: Purchasing Power Parities and Real Expenditures 1999 BENCHMARK YEAR, 2002.
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
International Comparison in 2002
Source: OECD: Purchasing Power Parities and Real Expenditures 2002 BENCHMARK YEAR, 2005.
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
KV (expenditures p.c.) and CPL (both OECD 30 = 100) and PPP (per 1$)
International Comparison in 2002
Source: OECD: Purchasing Power Parities and Real Expenditures 2002 BENCHMARK YEAR, 2005.
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
KV (expenditures p.c.) and CPL (both OECD 30 = 100) and PPP (per 1$)
International Comparison in 2002
Source: OECD: Purchasing Power Parities and Real Expenditures 2002 BENCHMARK YEAR, 2005.
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
KV (expenditures p.c.) and CPL (both OECD 30 = 100) and PPP (per 1$)
International Comparison in 2002
Source: OECD: Purchasing Power Parities and Real Expenditures 2002 BENCHMARK YEAR, 2005.
KV (expenditures p.c.) and CPL (both OECD 30 = 100) and PPP (per 1$)
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
Alternative measure of growth or real convergence process
• GDP growth in euro currency– The real convergence process of CEEC will be finished in
Eurozone– The growth will be announced in euro currency– The cohesion of the real and nominal convergence
process
• Concept ot the Real Gross Domestic Income– Terms of trade development
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
Alternative measure of growth – GDP growth in euro
• Euro– The real convergence process of CEEC will be finished in
Eurozone– The growth will be announced in euro currency
• Price convergence process– Later, but it has two channels – price differential and
exchange rate development – real exchange rate appreciation
– Case study of Czech Republic
• Alternative measure– Growth in euro currency
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
Growth in national currency & in euro
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Avg.
CZ -0,3 2,7 5,8 4,4 4,4 -0,8 -1,0 0,5 3,3 2,0 2,1
SVK -3,7 5,2 6,5 5,8 5,6 3,9 1,3 2,2 3,3 4,4 3,4
HUN -0,6 3,1 1,4 1,4 4,5 4,9 4,2 5,2 3,7 3,2 3,1
PLN 3,8 5,1 7,1 6,0 6,9 4,8 4,0 4,0 1,0 1,3 4,4
EU-12 -0,8 2,3 2,3 1,5 2,4 2,9 2,8 3,5 1,5 0,8 1,9
EU-15 -0,3 2,8 2,5 1,7 2,6 2,9 2,8 3,4 1,6 0,9 2,1
Source: Šaroch, S., Tomšík, V., Srholec, M. (2003) www.ieep.cz
Growth in national currency in 1993-2002 (avg.=average)
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Avg.
CZ 23,3 9,4 10,4 11,6 0,6 7,8 -1,3 8,2 9,4 11,2 8,9
SVK 17,0 9,9 11,3 9,5 10,8 5,1 -0,8 15,2 5,9 6,9 9,0
HUN 12,7 3,0 -5,2 4,7 10,2 3,6 8,0 9,9 11,6 11,8 6,9
PLN 16,3 8,2 14,9 21,1 12,8 5,9 1,6 16,9 12,4 -4,0 10,4
EU-12 -0,8 2,3 2,3 1,5 2,4 2,9 2,8 3,5 1,5 0,8 2,0
Growth in national currency in 1993-2002 (avg.=average)
Case study – Czech Republic 1993 1994 1995 1996 1997 1998
average1993-1998
GDP growth in CZK -0,3 2,7 5,8 4,4 -0,8 -1,0 1,7
Inflation in CZE 20,8 10,0 9,1 8,9 8,4 10,6 11,2
CZK/EUR 34,11 34,06 34,31 34,01 35,75 35,89 34,68
Nominal appreciation CZK/EUR 6,8 -0,1 -1,5 0,9 -5,1 -0,4 0,0
Inflation in EU-12 4,0 3,2 3,0 2,5 1,9 1,4 2,7
Inflation differential 16,8 6,8 6,1 6,4 6,5 9,2 8,6
Real appreciation CZK/EUR 23,6 6,7 4,6 7,3 1,4 8,8 8,5
GDP growth in EUR 23,3 9,4 10,4 11,6 0,6 7,8 10,3
Source: Šaroch, S., Tomšík, V., Srholec, M. (2003) www.ieep.cz
GDP Growth in Czech Republic, 1993-1998
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
GDP Growth in Czech Republic, 1999-2002
1999 2000 2001 2002average
1999-2002average
1993-2002
GDP growth in CZK 0,5 3,3 3,1 2,0 2,2 1,9
Inflation in CZE 2,1 3,9 4,7 1,8 3,1 7,9
CZK/EUR 36,87 35,61 34,06 30,81 34,32 34,54
Nominal appreciation CZK/EUR -2,7 3,4 4,3 9,6 3,6 1,4
Inflation in EU-12 1,2 2,4 2,7 2,2 2,1 2,4
Inflation differential 0,9 1,5 2,0 -0,4 1,0 5,6
Real appreciation CZK/EUR -1,8 4,9 6,3 9,2 4,6 6,9
GDP growth in EUR -1,3 8,2 9,4 11,2 6,8 8,9
Case study – Czech Republic - Conclusions
• First period– Price differentials were higher in first period – No nominal exchange rate appreciation
• Second Period– Nominal exchange rate appreciation was the stronger
channel in the second period
• But in 2010 euro instead of CZK– The real convergence process of CEEC will be finished in
Euro zone– The growth will be announced in euro currency, but no
nominal appreciation (overflow into inflation)
• Implications to ERM-II and Euro zone– Inflation and ER development – later …
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
Alternative measure - critique• Nominal and real convergence process put together
– Yes, it is true, but …
• Process of real exchange rate appreciation– !! Appreciation has to be sustainable
– Quality measure error– Deregulation of prices – Balassa-Samuelson problem
– FDI inflow with positive effect on current account development
– Better conditions for exports – customs duty, political restrictions, psychological restrictions, transaction costs, …
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
eSource: Šaroch, S., Tomšík, V., Srholec, M. (2003) www.ieep.cz
• Data– Use data from Deutsche Bank database
• Conclusions
Case studies – CEE countries - Conclusions
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
Concept ot the Real Gross Domestic Income
Source: Vintrová, R.: Co neodhaluje HDP při analýze ek. růstu a reálné konvergence. Working Paper CES VŠEM No. 1/2005
Terms of Trade Development
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
Czech Rep.
Germany
Austria
France
Hungary
Poland
Slovakia
Slovenia
Concept ot the Real Gross Domestic Income
Source: Vintrová, R.: Co neodhaluje HDP při analýze ek. růstu a reálné konvergence. Working Paper CES VŠEM No. 1/2005
Index of GDP growth per capita
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
Rank of countries – GDP or RGDI development (average in 2001-2004)
Source: Ždárek, V.,Ekonomická výkonnost země (alternativní pohled). Bulletin CES VŠEM, č. 8, 2005.
Czech Republic
Slovakia
Hungary
Poland
In turn of Diffence (perc. points)GDP RGDI
Czech Rep. 4 1 - 1,1
Hungary 2 4 - 0,2
Poland 5 5 0,4
Slovakia 1 2 0,7
Slovenia 3 3 - 0,5
Concept ot the Real Gross Domestic Income
Source: Vintrová, R., Ždárek, V.: HDP zrychluje, ale reálný důchod zpomaluje. (2005), ekonom.ihned.cz
Different Development of RGDI and GDP in Czech Republic
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
RGDI GDP Differences (percentage points)
2000 2,1 3,9 -1,8
2001 4,3 2,6 1,7
2002 3,7 1,5 2,2
2003 3,3 3,2 0,1
2004 4,6 4,4 0,2
Average 1996-2000 2,1 1,5 0,6
Average 1996-2004 2,9 2,1 0,8
Average 2001-2000 4,0 2,9 1,1
1st half of 2005 3,7 4,9 -1,2
Comparative Price Level
Source: ČNB: ANALYSES OF THE CZECH REPUBLIC’S CURRENT ECONOMIC ALIGNMENT WITH THE EURO AREA.2005. and Vintrová, R.: Co neodhaluje HDP při analýze ek. růstu a reálné konvergence. Working Paper CES VŠEM No. 1/2005
Comparative price increases with real exchange rate appreciation
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
Czech RepublicSlovakiaHungaryPoland
Increase in p.p.
CR = 1002003
Nominal convergence process GDP per capita in euro (EU-12 = 100)
Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
eSource: Ministry of Finance, Czech Republic. 2005
Portugal
Slovenia
Slovakia
Poland
Greece
Czech R.
Hungary
Comparative Price Level – Private Final Consumption – September 2005 Th
e Pu
zzles of C
entral an
d E
astern E
uro
pe T
ransfo
rmatio
n an
d In
tegratio
n E
CE
S, P
ragu
e
Source: OECD: Purchasing Power Parities and Real Expenditures 2002 BENCHMARK YEAR, 2005.