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The real exchange rate of the dollar for a panel of OECD countries: Balassa-Samuelson or distribution sector effect?

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  • Mariam Camarero

Abstract

The purpose of this paper is to analyse the role of productivity in the behaviour of the dollar real exchange rate against a group of OECD countries' currencies. To do this, a general specification is tested, paying special attention to the breakdown of the productivity variable into tradables, non-tradables and distribution sector productivity. The applied methodology relies on the Pool Mean Group estimation methodology proposed by Pesaran et al (1999) to obtain error correction models in panels without imposing equal long and shortrun parameters for the panel. The results point to the relevance of the differences in the distribution sector productivity to explain the real exchange rate, especially in the European Union countries. These results are in accordance with New Open Macroeconomics models predictions concerning the role of both distribution sector productivity and fiscal expenditure on the real exchange rate.

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  • Mariam Camarero, "undated". "The real exchange rate of the dollar for a panel of OECD countries: Balassa-Samuelson or distribution sector effect?," Working Papers on International Economics and Finance 06-04, FEDEA.
    • Handle: RePEc:fda:fdadef:06-04
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    References listed on IDEAS

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    Cited by:

    1. Fernando Alexandre & Pedro Bação, 2012. "Portugal before and after the European Union: Facts on Nontradables," NIPE Working Papers 15/2012, NIPE - Universidade do Minho.
    2. Ghosh, Saurabh & Nath, Siddhartha & Srivastava, Sauhard, 2021. "Productivity and Real Exchange Rates for India: Does Balassa-Samuelson Effect Explain?," MPRA Paper 110913, University Library of Munich, Germany.
    3. Works, Richard Floyd, 2016. "Econometric modeling of exchange rate determinants by market classification: An empirical analysis of Japan and South Korea using the sticky-price monetary theory," MPRA Paper 76382, University Library of Munich, Germany.
    4. Wang, Weiguo & Xue, Jing & Du, Chonghua, 2016. "The Balassa–Samuelson hypothesis in the developed and developing countries revisited," Economics Letters, Elsevier, vol. 146(C), pages 33-38.
    5. Cushman, David O. & Michael, Nils, 2011. "Nonlinear trends in real exchange rates: A panel unit root test approach," Journal of International Money and Finance, Elsevier, vol. 30(8), pages 1619-1637.
    6. Works, Richard & Haan, Perry, 2017. "An Empirical Study of Japanese and South Korean Exchange Rates Using the Sticky-Price Monetary Theory," MPRA Paper 77235, University Library of Munich, Germany.
    7. Lopcu, Kenan & Dülger, Fikret & Burgaç, Almıla, 2013. "Relative productivity increases and the appreciation of the Turkish lira," Economic Modelling, Elsevier, vol. 35(C), pages 614-621.

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    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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