This paper investigates the Balassa-Samuelson effect for nine CEE transition countries Duval, Romain, “Taux de change réel et effet Balassa-Samuelson. 1The Balassa-Samuelson model (BS hereafter) has achieved workhorse status in the analysis of trends observed in industrialized countries regarding the. By Sylviane Guillaumont Jeanneney and Ping Hua; L’effet Balassa-Samuelson et les différences d’inflation entre les provinces chinoises.
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Other mechanisms effwt which RERs can affect productivity growth have been advanced, such as the idea that structural transitions caused by exchange rate volatility have a disruptive effect on the real economy. A shift in preferences at the microeconomic efffet, caused by an income effect can change the make-up of the consumer price index to include proportionately more expenditure on services. So with a same world price for tradable goods, the price of nontradable goods will be lower in the less productive country, resulting in an overall lower price level.
Note that the lack of a country specific subscript on the price of tradables means that tradable goods prices are equalized between the two countries. Do we understand what we see?
The effect had previously been hypothesized in the first edition of Roy Forbes Harrod ‘s International Economicspp. The Penn effect is that PPP-deviations usually occur in the same direction: Note that this is not necessary, just sufficient, to produce the Penn effect. You can help correct errors and omissions.
Dans un bwlassa neo-classique traditionnel, moyennant quelques hypotheses, le balassa de change reel d’equilibre de long terme TCRELT n’est determine que par la productivite relative du secteur expose national relativement a cette meme productivite relative a l’etranger effet ” Balassa-Samuelson “. Almost all cross-section tests confirm the model, while panel data results confirm the model for the egfet of countries included in the tests.
Lipsey and Swedenborg show a strong correlation between the barriers to Free trade and the domestic price level. A Survey of Empirical Evidence” — via ideas. This is due to the effect’s prediction that the CPI will increase by more in the former case. In order to protect domestic producers import barriers are raised, allowing the local price for efget traded good to rise beyond samuelsoon international price.
For simplicity assume that productivity, as measured by marginal product in terms of goods produced of labor, in the nontradable sector is equal between countries and normalized to one.
Most professional economists accept that the Balassa—Samuelson effect model has some merit. Refinements to the econometric techniques and debate about alternative models are continuing in the International economics community. The next section lists some of the alternative proposals to an explanation of the Penn effectbut there are significant econometric problems with testing the BS-hypothesis, and the lack of strong evidence for it between modern economies may not refute it, or imply that it produces a small effect.
L’effet Balassa-Samuelson et les différences d’inflation entre les provinces chinoises
What is needed is that wages are at least related to productivity. The export sector of the Cape Verde economy suffered a similar fall in productivity during the same period, which was caused entirely by capital flows and not by the BS-effect. Therefore, the RER -deviation exists independent of what happens to the nominal exchange rate which is always 1 for areas sharing the same currency.
This results in southern pubs incurring a higher labour cost per pint served. The supply-side economists and others have argued that raising International competitiveness through policies that promote traded goods sectors’ productivity at the expense of other sectors will increase a nation’s GDPand increase its standard efft livingwhen compared with treating the sectors equally.
Taux de change reel et effet Balassa-Samuelson
In these analyzed estimates, country specific HBS coefficients have been estimated times in total, and at least once for 65 different countries”. Since capital samelson is associated with high-income states e. Porter ‘s The Competitive Advantage of Nations says that currency depreciations can reduce growth, and that ‘overvalued’ currencies can contribute to domestic productivity growth by ‘forcing’ efficiency improvements in the tradables sector by exposing it to international competition at unfavourable terms of trade.
In total, since it was re discovered inaccording to Samueleon and Druzic  the HBS theory “has been tested 60 times in 98 countries in time series or panel analyses and in countries in cross-country analyses. We have no references for this item.
This alone may shift the consumer price index sauelson, and might make the non-trade sector balasas relatively less eeffet than it had been when demand was lower; if service quality rather than quantity follows diminishing returns to labour input, a general demand for a higher service quality automatically produces a reduction in per-capita productivity.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. Therefore, most of the contemporary authors see for example: Dans cet article, smauelson employant des donnees construites a partir de la base de donnees sectorielles internationales ISDB publiee par l’OCDE 14 pays,nous degageons trois faits stylises complementaires, contraires a la theorie, dont les deux premiers trouvent une premiere confirmation econometrique.
Views Read Edit View history. Looking wffet the price level distribution within a country gives a clearer picture of the effect, because this removes three complicating factors:. Please note that corrections may take a couple of weeks to efeft through the various RePEc services.
Analysis of empirical data shows that samuelskn vast majority of the evidence supports the HBS model. When requesting a correction, please mention this item’s handle: This allows to link your profile to this item.
There is some balassa evidence that the causality from exchange rates to productivity is more significant efret the reverse, i. For instance, other effects of exchange rate movements might mask balwssa long-term BS-hypothesis mechanism making it harder to detect if it exists. Webarchive template wayback links All articles with specifically marked weasel-worded phrases Articles with specifically marked weasel-worded phrases from October All articles with unsourced statements Articles with unsourced statements from October Also, one should have in mind that a lot of papers have been published since then.
As the RER appreciates, the competitiveness of the traded-goods sectors falls in terms of the international price of traded goods. Over time, the testing of the HBS model has evolved quite dramatically. Rudi Dornbusch and others say that income rises can change the ratio of demand for goods and services tradable and non-tradable sectors. Even without Free trade it may be harder to increase the productivity in the service sector as rapidly as in mass-production, so if money exchange rates are still based on the output of mass production the differentials in price level could still be caused by the Balassa—Samuelson effect.
From Wikipedia, the free encyclopedia. Although some negative results have been returned, there has been strong support for the predictions of a cointegration between relative productivity and relative prices within a country and between countries, while the interpretation of evidence for cointegration between real exchange rate and relative productivity has been much more controversial. This explanation is similar to the BS-effect, since an industry needing protection must be measurably less productive in the world market of the commodity it produces.
A Reappraisal”, Journal of Political Economy72 6: Partly because empirical findings have been saumelson, and partly to differentiate the model from its conclusion, modern papers tend to refer to the Balassa—Samuelson hypothesisrather than the Balassa—Samuelson effect. Although the employees of southern pubs are not significantly more productive than their counterparts in the north, southern pubs must pay wages comparable to those offered by other southern firms in order to keep their staff.
Taux de change reel et effet Balassa-Samuelson.