Does the Balassa-Samuelson Hypothesis Hold for Asian Countries? An Empirical Analysis using Panel Data Cointegration Tests

Imed Drine () and Christophe Rault

No 504, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: This paper tests empirically the Balassa-Samuelson (BS) hypothesis using annual data for 6 Asian countries. We apply new panel data cointegration techniques recently developed by Pedroni (2000) and we compare the results with those obtained with conventional Johansen (1995)’s time series cointegration tests. Whereas, standard time series approach turns out to be able to put in evidence a significant long-run relationship between real exchange rate and productivity differential; this relationship is strongly rejected for all countries using recent advances in the econometrics of non-stationary dynamic panel methods. Closer examinations of the three key components of the BS hypothesis enable us to identify clearly the causes of this empirical failure. We find that the absence of a positive long-run relationship between productivity differential and relative prices is the reason for this rejection.

Keywords: Real Exchange Rate; Balassa-Samuelson hypothesis; Asian countries; Panel unit-root and cointegration tests (search for similar items in EconPapers)
JEL-codes: C15 E31 F0 F31 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2002-08-01
New Economics Papers: this item is included in nep-ets and nep-ifn
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp504.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp504.pdf [302 Found]--> https://wdi.umich.edu/files/Publications/WorkingPapers/wp504.pdf)

Related works:
Working Paper: Does the Balassa-Samuelson Hypothesis Hold for Asian Countries? An Empirical Analysis using Panel Data Cointegration Tests (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wdi:papers:2002-504

Access Statistics for this paper

More papers in William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109. Contact information at EDIRC.
Bibliographic data for series maintained by WDI ().