The impact of Productivity Difference Among Sectors on Inflation and Real Exchange Rate in Turkey

Omer Ozcicek ()
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Omer Ozcicek: Gaziantep University

Anadolu University Journal of Social Sciences, 2006, vol. 6, issue 1, 145-158

Abstract: This paper empirically tests the Balassa-Samuelson effect in Turkey. According to Balassa-Samuelson hypothesis, the productivity in tradable sectors increase faster than the productivity in non-tradable which causes a lower increase in the price level of tradable goods. This mechanism in general generates a higher inflation in the country. As aresult of this inflationary effect the real exchange rate appreciates. This study presets some supportive evidences about the existence of this hypothesis in Turkey. Time series analysis show that relative productivities have some effect on relative prices, and real exchange rate between Turkey and Germany, relative price levels of Turkey and Germany are cointegrated as the Balassa-Samuelson conjecture foresees.

Keywords: Nominal exchange rates; inflation; causality. (search for similar items in EconPapers)
JEL-codes: D24 E31 E52 (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:and:journl:v:6:y:2006:i:1:p:145-158

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