Dual Inflation Under the Currency Board: The Challenges of Bulgarian EU Accession

William Davidson Institute Working Paper 487

health and social work, veterinary activities, non-government organizations activities,
sewage and refuse disposal, sanitation and other services, cultural activities and
recreational and sporting activities. Salaries are calculated with weights of the employees
for the respective classification group in the whole number of the sector to which the
branch belongs.

Data on prices

The structure of the CPI in Bulgaria is a national analogue of the international
classification of consumers’ expenditure known as COICOP (Classification Of Individual
Consumption by Purpose) and it covers the structure of Harmonized Index of Consumer
Prices (HICP). It is introduced in the end of 1996 and it constitutes a unique set of
information since it is a homogeneous indicator for the comparison of inflation dynamics
among accession countries as well as vis-à-vis the euro area.

As in other empirical studies, a first difficulty arises when trying to distinguish
between tradable and non-tradable goods and services, as the different item categories
included in the HICP cannot always be easily identified as tradables and non-tradables. In
a recent research paper (Arratibel and al., 2001) the categories of HICP are classified in
the following way without much loss of accuracy. Tradables are composed of food and
non-alcoholic beverages, alcoholic beverages and tobacco, clothing and footwear and
furnishings, household equipment and routine maintenance of the house. Non-tradables
are composed of health, communication, recreation and culture, education, restaurants
and hotels, and miscellaneous goods and services.

Since 1998 the Agency of Economic Analysis and Forecasts (AEAF) has
developed a classification of the goods and services of the consumer bundle in three
groups: tradable, potentially tradable and non-tradable. The criteria for distinguishing
between tradable and potentially tradable goods are the administrative and transport
barriers. “Pure import”, later on called tradable goods, consists of goods with duty tax
lower than 25% and no transport barriers while “broad import” comprises of goods that
are subject only to administrative barriers and they represent the potentially tradable

17

<<   16   17   18   19   20   21   22   >>

More intriguing information