Empirical test of the Balassa-Samuelson effect in selected African countries
Zitsile Zamantungwa Khumalo and
MPRA Paper from University Library of Munich, Germany
The purpose of this study investigates the validity of the Balassa-Samuelson effect in selected African countries. The kernel of the Balassa-Samuelson (BS) effect is the relationship between productivity and real exchange rate. The study therefore, estimates the equilibrium real exchange with total factor productivity as the main explanatory variable. The results revealed that Balassa-Samuelson effect holds in the selected African countries. The results show a positive relationship between real exchange rate and productivity. An increase in total factor productivity causes real exchange rate appreciation. An improvement in productivity can cause countries to experience an increase in prices of their products relative to trading partners. The study recommends that the selected African countries should pursue policies that maintain competitive real exchange rate.
Keywords: Real exchange rate; productivity; Balassa-Samuelson effect (search for similar items in EconPapers)
JEL-codes: C33 F00 F30 F39 (search for similar items in EconPapers)
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Working Paper: Empirical test of the Balassa-Samuelson Effect in Selected African Countries (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:101495
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