THE BAUMOL-BALASSA-SAMUELSON EFFECT OVER ONE CENTURY IN SIX EU COUNTRIES AND THE UNITED STATES

Applied Econometrics and International Development, 2008, vol. 8, issue 1, pages 41-52

Abstract: The aim of this paper is to test the Baumol-Balassa-Samuelson effect in seven countries over one century. The test accounts for an endogenous structural break in data and shows that the relative price of non-tradable goods shares a common stochastic trend with differences in productivity growth between the tradable and non-tradable sectors in six countries. The estimates of this paper suggest that differences in productivity growth between countries are an important determinant of the behaviour of real exchange rates.

Keywords: productivity bias; real exchange rate; structural break (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Date: 2008
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