OECD ÜLKELERİNDE REEL DÖVİZ KURU HAREKETLERİNİN AÇIKLANMASINDA BALASSA-SAMUELSON ETKİSİ

Abstract

According to Balassa-Samuelson hypothesis which explains real exchange rate movements by productivity differences between tradable and non-tradable sectors, an increase in the relative productivity of tradable sector leads to a real appreciation of domestic currency. In this study, we analyze whether the Balassa-Samuelson hypothesis is valid employing recent panel data tehniques for a panel data set covering 25 OECD countries and the period 1990-2016. To this aim, the effect of sectoral relative productivity on real exchange rate is examined employing panel data estimators considering country heterogeneity, dynamic behavior and cross-section dependency. Results of Pooled Mean Group estimations support the Balassa-Samuelson hypothesis for OECD countries. However, the effect of relative productivity on real exchange rate becomes statistically insignificant when we control the cross-section dependency that arises due to common global shocks by employing Cross-sectionally Augmented Panel ARDL estimator (Chudik and Pesaran, 2015). Consequently, Balassa-Samuelson hypothesis cannot be robustly supported for OECD countries.