Symmetry, proportionality and productivity bias hypothesis: evidence from panel-VAR models

Manuchehr Irandoust ()
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Manuchehr Irandoust: Halmstad University

Economic Change and Restructuring, 2017, vol. 50, issue 1, No 5, 79-93

Abstract: Abstract By imposing symmetry and proportionality conditions and using the asymptotic theory of panel-VAR models, this study examines the behavior of real exchange rates and productivity bias hypothesis for New Zealand vis-a-vis her major trading partners and the proposed free trade area. The evidence clearly rejects the strong version of the PPP hypothesis but the weak version of the PPP hypothesis receives some support. The findings also indicate that productivity differentials among countries are one of the major sources that contribute to the deviation of the PPP-based exchange rate from the equilibrium rate. Policy implications for the proposed free trade agreement are offered.

Keywords: Likelihood-based panel cointegration; Productivity bias hypothesis; PPP; Panel rank test; Symmetry (search for similar items in EconPapers)
JEL-codes: C32 E31 F31 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s10644-016-9185-y

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