Balassa-Samuelson Effect in Poland: Is Real Convergence a Threat to Nominal One?

In this article I try to estimate the Balassa-Samuelson effect for Poland during the transition period. I try to answer the question about the difference in inflation between Poland and EU that can be attributed to productivity growth differentials. Expected further faster growth of tradable goods productivity in Poland as compared to EU, apart from other factors, can contribute to real apprectiation of Polish zloty and/or a higher inflation rate. Both of these results can negatively influence the possibility of compliance to Maastricht convergence criteria. My calculations for the period 1995(1)–2004(2) (quarterly data) that higher relative productivity growth in Poland than in EU translated to a higher inflation in Poland by 1.6pp than EU15 average.