Testing the BalassA-Samuelson hypothesis in two different groups of countries: OECD and Latin America

José García Solanes and Fernando Torrejón Flores
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José García Solanes: Universidad de Murcia and CentrA
Fernando Torrejón Flores: Universidad de Murcia
Authors registered in the RePEc Author Service: José García Solanes () and Fernando Torrejón-Flores

No 05-02, Working Papers from Asociación Española de Economía y Finanzas Internacionales

Abstract: This paper studies the Balassa-Samuelson hypothesis (BSH) in the context of two areas with strong differences in economic development, twelve OECD countries and twelve Latin American economies, taking the USA as the benchmark. Applying panel cointegration techniques, we find that while the first stage of the hypothesis, which links productivities and prices, is satisfied in each group of countries, the second stage, which relates relative sector prices with the real exchange rate, only holds in the Latin American area. The failure of the latter in the OECD countries as a whole is reflected in departures from PPP in the tradable sectors.

Keywords: Balassa-Samuelson effect; Panel cointegration; Economic development; Exchange rate systems (search for similar items in EconPapers)
JEL-codes: C15 E31 F31 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2005-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Testing the BalassA-Samuelson hypothesis in two different groups of countries: OECD and Latin America
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Persistent link: https://EconPapers.repec.org/RePEc:aee:wpaper:0502

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