The article investigates the Harrod Balassa Samuelson (HBS) effect in 11 transition countries in Eastern Europe. The researchers used quarterly national account data to analyze the tradable and nontradable sectors without making unrealistic assumptions. They also considered government consumption in GDP as a factor. The results showed that univariate cointegrating vectors were found in Bulgaria, Croatia, and Lithuania, with strong evidence of cointegration post-2000. In the period after 1995, the inclusion of government consumption as an independent variable and the methodology used affected the rejection of the null hypothesis.