Former Soviet Union as the World champion in cheapness

The paper assesses the relationship between income and price levels in the Former Soviet Union (FSU) republics relative to remaining countries during the period 1991-2000. The basic idea of the paper is that the price levels of FSU republics were in the 1990s remarkably lower not only vis-à-vis the non-transitional economies with income levels similar to those of the FSU republics but also vis-à-vis non-FSU transitional countries. The author finds out the cross-country relationship between income and price levels among non-transitional economies and derives from this equation the income-predicted price levels for the FSU republics both at the very beginning, in the middle and at the end of the 1990s. Based on his calculations, the author assesses the differences between the FSU republics' income-predicted and actual price levels and compares the results with those of the non-FSU transitional countries.