Real Exchange Rates Over the Past Two Centuries: How Important is the Harrod-Balassa-Samuelson Effect?

James Lothian and Mark Taylor

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: Using data since 1820 for the US, the UK and France, we test for the presence of real effects on the equilibrium real exchange rate (the Harrod-Balassa-Samuelson, HBS effect) in an explicitly nonlinear framework and allowing for shifts in real exchange rate volatility across nominal regimes. A statistically signifcant HBS effect for sterling-dollar captures its longrun trend and explains a proportion of variation in changes in the real rate that is proportional to the time horizon of the change. There is signifcant evidence of nonlinear reversion towards long-run equilibrium and downwards shifts in volatility during &xed nominal exchange rate regimes.

Keywords: purchasing power parity; real exchange rate; nonlinear dynamics; Harrod-Balassa-Samuelson effect; productivity differentials (search for similar items in EconPapers)
JEL-codes: C1 F31 F41 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2006
New Economics Papers: this item is included in nep-cba and nep-ifn
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Citations: View citations in EconPapers (10)

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https://warwick.ac.uk/fac/soc/economics/research/w ... s/2006/twerp_768.pdf

Related works:
Journal Article: Real Exchange Rates Over the Past Two Centuries: How Important is the Harrod-Balassa-Samuelson Effect? (2008)
Journal Article: Real Exchange Rates Over the Past Two Centuries: How Important is the Harrod‐Balassa‐Samuelson Effect? (2008)
Working Paper: Real Exchange Rates Over the Past Two Centuries: How Important is the Harrod-Balassa-Samuelson Effect? (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:768

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