roductivity and Exchange Rate Dynamics: Supporting the Harrod- Balassa-Samuelson Hypothesis through an ‘Errors in Variables’ Analysis
نویسندگان
چکیده
Standard tests of the Harrod-Balassa-Samuelson (HBS) hypothesis treat productivity levels in and across countries as fixed and observable, and offer little empirical support for the hypothesis. If productivity follows a jump-diffusion process, these standard tests will generate biased estimates, measuring productivity levels with error. This paper instead proposes an ‘errors in variables’ approach to correct this bias, and finds support for the HBS hypothesis assuming a jump-diffusion process in productivity. Empirical results are obtained for a data set available for the United States, Japan, West Germany and France over the period 1960 to 1996. Acknowledgements: Thanks to Steve Dowrick, Martin Richardson, Ngo Van Long, R. Quentin Grafton and Suiwah Leung for helpful comments on earlier versions of this work. JEL Classification: F10, F11, F31, C10
منابع مشابه
Studies in Nonlinear Dynamics and Econometrics
We examine the behavior of the real exchange rates of nine transition economies during the 1990s. We propose an empirical model rationalized on the basis of standard economic models in the tradition of Mundell-Fleming-Dornbusch and Harrod-Balassa-Samuelson, allowing explicitly for real interest rate differentials and (implicitly) for productivity differentials to have an impact on real exchange...
متن کاملThe Harrod - Balassa - Samuelson Hypothesis : Real Exchange Rates and their Long - Run Equilibrium
Frictionless, perfectly competitive traded-goods markets justify thinking of purchasing power parity (PPP) as the main driver of exchange rates in the long-run. But differences in the traded/non-traded sectors of economies tend to be persistent and affect movements in local price levels in ways that upset the PPP balance (the underpinning of the Harrod-Balassa-Samuelson hypothesis, HBS). This p...
متن کاملDoes the Balassa - Samuelson theory explain the link between relative population growth and purchasing power parity ?
Relative population growth affects relative prices through the so-called BalassaSamuelson (BS) mechanism and that in turn impacts PPP. This paper empirically investigates the relationship between PPP exchange rate and relative population growth in a panel of 80 selected countries. Following the Balassa-Samuelson hypothesis this paper argues that relative population growth affects nominal wages ...
متن کاملReal Exchange Rate Misalignments: Theoretical Modeling and Empirical Evidence
The real exchange rate (RER) misalignment is a key variable in academic and policy circles. Among policy circles, sustained RER overvaluations are observed by authorities for future exchange rate adjustments. Some countries, on the other hand, have pursued very active exchange rate policies in order to undervalue their currencies to foster growth through export promotion (e.g. China). Our goal ...
متن کاملThe data of GDP and exchange rate used in the Balassa–Samuelson hypothesis
This article introduces the data of the log real GDP per capita ratio and the log real exchange rate which are used to revisit the Balassa-Samuelson Hypothesis. We acquired the data from IMF and World Bank database, and provide the name and source of the data. All data are openly accessible. Besides, we describe the value of data as well as the method to process the data which can also be found...
متن کامل