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The Balassa-Samuelson Effect Reversed: New Evidence from OECD Countries

Christoph Sax () and Matthias Gubler ()
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Christoph Sax: University of Basel

Working papers from Faculty of Business and Economics - University of Basel

Abstract: This paper explores the robustness of the Balassa-Samuelson (BS) hypothesis. We analyze a panel of OECD countries from 1970 to 2008 and compare three different datasets on sectoral productivity, including a newly constructed database on total factor productivity. Overall, our DOLS estimation results do not support the BS hypothesis. For the last two decades, we find a very robust negative relationship between the productivity in the tradable sector and the equilibrium real exchange rate, in contrast to BS. Earlier supportive findings depend strongly on the choice of the dataset. Except for the terms of trade, the explanatory power of other variables is weak.

Keywords: Rate; Balassa-Samuelson hypothesis; panel data estimation; terms of trade (search for similar items in EconPapers)
JEL-codes: F14 F31 F41 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cba, nep-int and nep-opm
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https://edoc.unibas.ch/27966/1/gubler_sax_BSeffect_dec11_02.pdf (application/pdf)

Related works:
Journal Article: The Balassa-Samuelson effect reversed: new evidence from OECD countries (2019) Downloads
Working Paper: The Balassa-Samuelson Effect Reversed: New Evidence from OECD Countries (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bsl:wpaper:2011/09

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