A Test of the Balassa-Samuelson Effect Applied to Chinese Regional Data

Qian Guo () and Stephen Hall
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Qian Guo: Business School, Loughborough University, Ashby Road, Loughborough LE11 3TU, UK, Phone: 44(0)1509223177

Journal for Economic Forecasting, 2010, issue 2, 57-78

Abstract: In this paper, we investigate the relevance of the Balassa-Samuelson effect to the determination of regional inflation in China, for the period 1985 – 2000. To do this, we first construct annual measures of Chinese inflation and industry input on regional and sectoral basis. Then we generalise the Asea and Mendoza (1994) settings to consider asymmetric productivity shocks across sectors. Testing this model on Chinese Regional Data aid of non-stationary panel data techniques, it shows that our extended theoretical model is a good empirical representation of the Chinese data that supports the Balassa-Samuelson effect. Moreover, we are able to test the Asea and Mendoza (1994) version of our general model and find that the restrictions are rejected.

Keywords: Balassa-Samuelson effect; productivity shocks; panel data (search for similar items in EconPapers)
JEL-codes: C23 E23 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (3)

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Working Paper: A Test of the Balassa-Samuelson Effect Applied to Chinese Regional Data (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:rjr:romjef:v::y:2010:i:2:p:57-78

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