The effect of Balassa-Samuelson in South-East Asia
High growth in the South-East Asian countries for the past three decades should imply high increases in productivity to reveal the Balassa-Samuelson (BS) effect of high growth accompanied by real exchange rate (RER) appreciation. This paper examines the effects of productivity increases by developin...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Canadian Center of Science and Education
2008
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| Online Access: | http://psasir.upm.edu.my/id/eprint/7611/ http://psasir.upm.edu.my/id/eprint/7611/1/7611.pdf |
| Summary: | High growth in the South-East Asian countries for the past three decades should imply high increases in productivity to reveal the Balassa-Samuelson (BS) effect of high growth accompanied by real exchange rate (RER) appreciation. This paper examines the effects of productivity increases by developing a robust unrestricted error correction model (UECM) of RER based on a class of theories of time-varying equilibrium exchange rates as opposed to the conventional PPP-based theory. An empirical study was carried out on four selected Southeast Asian countries: Indonesia, Malaysia, Singapore, and Thailand. This work suggests that the effects of productivity increases may be more complicated than what the theory suggests and points to the possibility that the Balassa-Samuelson is affected by the stage of economic development rather than mere productivity increases. |
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