Abstract:The Balassa and Samuelson hypothesis --BS -- (Balassa, 1964, Samuelson, 1964, which natural point of departure is the Salter-Swan (dependent economy) model is analysed. It offers general theoretical justification of the long run trends in real exchange rates in relation to productivities and prices. This is to say, that taking into consideration the important real world feature of having both tradable and nontradable goods BS states that if a given country's productivity in producing tradable goods compared to… Show more
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