William Davidson Institute Working Paper 487
observations in total. The period under survey is long enough to capture some cause-and-
effect regularities in the inflation dynamics under the new monetary system.
In order to check the rate of price convergence and whether BS effect exists in
Bulgaria or not, we need productivity indicators for the tradable and non-tradable groups.
In the process of achieving high level of international statistical comparability, the data
provided by the Bulgarian National Statistical Institute is primarily based on Eurostat
methodology. However, some econometric estimations have not included Bulgaria on the
ground of data unavailability or data unreliability (see. Backe, and al., 2002 ).
For defining the sectors as tradable and non-tradable we use a common approach
applied by most studies on the subject where industry is regarded as tradable and services
as non-tradable sector. However, there are some more specific criteria like the one used
by De Gregorio and al., 1994 who treat a sector as tradable if more than 10% of its
production is for export.
Data on production, salaries and employees
The production indicator is represented by the gross output from the quarterly
national accounts by industry, services and agriculture sectors. According to the National
Statistical Institute (NSI) methodology CPI structure corresponds with the definitions of
the National Accounts system in relation to personal consumption and range. Since
monthly data for the production of the non-tradable sector is not available (we could find
a proxy for the tradable sector), we apply an econometric interpolation method for
obtaining high frequency data keeping the fundamental variables’ development.
Average monthly salaries and total number of employees are reported every
month in a wide range of economic activity. In order to acquire data for industry and
services we apply some aggregation techniques (see annex 2). Tradable sector (industry)
includes employed people in mining and quarrying, manufacturing (15 branches),
electricity, gas and water supply and construction while non-tradable (services) represent
employees in trade, repairing activities, hotels and restaurants, transport, communication,
financial intermediation, real estate and renting activities, research and development and
other business activities, public administrations, compulsory social security, education,
16