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Discussion Paper

No. 2008-14 | April 08, 2008
The Balassa-Samuelson Hypothesis in Developed Countries and Emerging Market Economies: Different Outcomes Explained

Abstract

This paper studies the Balassa-Samuelson hypothesis in two areas with strong differences in economic development, sixteen OECD countries and sixteen Latin American economies. Applying panel cointegration and bootstrapping techniques that solve for cross-sectional dependence problems in the data, we find that the second stage of the hypothesis, which relates relative sector prices with the real exchange rate, only holds in the Latin American area. The failure of the latter in the OECD countries as a whole is reflected in departures from PPP in the tradable sectors, and is probably due to segmentation between national tradable markets.

Paper submitted to the special issue “Using Econometrics for Assessing Economic Models” edited by Katarina Juselius.

JEL Classification

C15 E31 F31

Cite As

José García Solanes and Fernando Torrejón Flores (2008). The Balassa-Samuelson Hypothesis in Developed Countries and Emerging Market Economies: Different Outcomes Explained. Economics Discussion Papers, No 2008-14, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2008-14

Assessment



Comments and Questions


Anonymous - Reader Comment
May 20, 2008 - 12:38

see attached file


José García Solanes - Response to Reader Comment
December 17, 2008 - 09:04

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Anonymous - Comment
June 19, 2008 - 19:11

José García Solanes - Response to Reader Comment
December 17, 2008 - 09:05

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Anonymous - Referee Report
July 28, 2008 - 13:01

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José García-Solanes - Response to Referee Report
January 02, 2009 - 09:14

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José García-Solanes - Revised Version
January 02, 2009 - 09:16

see attached file