Should we be concerned about appreciation of the Crown?

The OECD 1998 data analyzes shows close correlation between GDP per head and low relative price level concerning the transition and less developed economies. The correlation, however, is not a causual one. Both sides of the correlation are causually determined by the gap in qualitative properties of comodities, high transaction costs and an outsider position toward the multinational corporations. The theory of comparative advantages is not an adequate reflection of contemporary international trade. A theorem is valid: if the relative price levels of mutually trading countries are different and if each country is price-taker when importing and price-maker when exporting, then wealth is redistributed from the country having lower in favour of the country having higher relative price level. Right this is the transition countries' case.

Keywords: relative price level, transaction costs, exchange rate dumping, theory of comparative advantages