The Balassa‐Samuelson Model: A General‐Equilibrium Appraisal*

Asea, Patrick K.; Mendoza, Enrique G.

doi:10.1111/j.1467-9396.1994.tb00043.x

Cited by 167 publications

(107 citation statements)

References 21 publications

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“…Asea and Mendoza (1994), De Gregorio et al (1994a,b), Strauss (1999), Bahmani-Oskooee and Nasir (2001) and Egert et al (2003)). The empirical study in Sheng and Xu (2011) also falls in this last category.…”

Section: A Brief Overview Of the Literaturementioning

confidence: 99%

“…4 Asea and Corden (1994), Asea and Mendoza (1994) and Turnovsky and Sen (1995) study the BS effect within a model with two production factors: labour and capital. Asea and Corden (1994) and Asea and Mendoza (1994) examine the implications of incorporating a demand side in the BS framework.…”

Section: A Brief Overview Of the Literaturementioning

confidence: 99%

“…Asea and Corden (1994) and Asea and Mendoza (1994) examine the implications of incorporating a demand side in the BS framework. These theoretical extensions corroborate that productivity differentials are at the root of relative price variations between tradable and nontradable goods, hence also between home and foreign goods.…”

Section: A Brief Overview Of the Literaturementioning

confidence: 99%

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The impact of market regulations on intra-European real exchange rates

Bénassy‐Quéré

Coulibaly

2014

Rev World Econ

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We study the contribution of market regulations in the dynamics of the real exchange rate within the European Union. Based on a model proposed by De Gregorio et al. (1994a), we show that both product market regulations in nontradable sectors and employment protection tend to inflate the real exchange rate. We then carry out an econometric estimation for European countries over 1985-2006 to quantify the contributions of the pure Balassa-Samuelson effect and those of market regulations in real exchange-rate variations. Based on this evidence and on a counter-factual experiment, we conclude that the relative evolution of product market regulations and employment protection across countries play a very significant role in real exchangerate variations within the European Union and especially within the Euro area, through theirs impacts on the relative price of nontradable goods.

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Section: A Brief Overview Of the Literaturementioning

confidence: 99%

Section: A Brief Overview Of the Literaturementioning

confidence: 99%

Section: A Brief Overview Of the Literaturementioning

confidence: 99%

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The impact of market regulations on intra-European real exchange rates

Bénassy‐Quéré

Coulibaly

2014

Rev World Econ

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“…6 A sample of these studies includes Balassa (1964), Officer (1976), Hsieh (1982), Asea and Mendoza (1994), De Gregorio, Giovannini, andWolf (1994), Canzoneri, Cumby andDiba (1999), Chinn (2000), and Kakkar (2003). 7 For example, Marston (1987) and Canzzoneri, Cumby and Diba (1999) use labor productivity, while De Gregorio, Giovannini, and Wolf (1994) and Asea and Mendoza (1994) use total factor productivity. We adopt the average product of labor approach to measure productivity due to the lack of prefecture-level sectoral data to calculate total factor productivity.…”

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confidence: 99%

The Penn effect within a country: evidence from Japan

Cheung

Fujii

2014

Oxford Economic Papers

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Penn Effect within a CountryEvidence from Japan Terms of use: Documents in EconStor may AbstractTo control for product quality and eliminate the exchange rate volatility effect, we use the Japanese regional data to study the Penn effect -the positive relationship between price and income levels. Similarly to what is widely documented with international data, the price and income levels exhibit significant positive association across the Japanese prefectures. Furthermore, the intra-Japan Penn effect is driven essentially by prices of nontradables. The effect is also found stronger among rich prefectures than poor ones, as is the case with the international data. In explaining the Penn effect within Japan, we find that the measures of sectoral productivity do not behave in the way suggested by the Balassa-Samuelson hypothesis. On the other hand, the population density variable that captures the agglomeration effect offers a good explanatory power.JEL-Code: F310, F340, F360.Keywords: agglomeration effect, Penn effect, sectoral productivity differential, tradables and non-tradables, population density. Yin-Wong Cheung Department of Economic and IntroductionThe Penn effect refers to the robust empirical positive association between national price levels and real per capita incomes that is documented by a series of Penn studies including Lipsey (1983, 1987), Kravis, Heston and Summers (1978), and Summers and Heston (1991). That is, compared with poor countries, rich countries tend to have higher price levels. The positive association between income and price levels is considered as a fundamental fact of economics (Samuelson, 1994) and a conventional wisdom in international macroeconomics (Bergin 2009).Since the early Penn studies, the internationally comparable income and output data The current exercise investigates the price and income relationship using intra-Japan data. The restrictions on trade and labor mobility between countries are quite different from those between regions in Japan. Thus, it will be of interest to investigate if the Penn effect usually documented within the international context could be extended to data within a country.Beside an alternative perspective, the use of Japanese data alleviates some concerns about data incompatibility and its implications for studying the income effect on prices. For instance, the Japanese regional price data examined in the following sections are for products that are quite similar in both quality ...

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“…Edison and Klovland (1987), through the study of the pound and the Norwegian krone, found that the real exchange rate movements were influenced by the productivity growth gap between the two countries. On the basis of the dynamic equilibrium model, Asea and Mendoza (1994) had a test on the Balassa-Samuelson effect for the first time. Strauss (1995), Strauss (1996), Kawai (1997) proved that a national exchange rate had a significant effect of B-S. Zussman (2001) introduced the technology of infiltration mechanism, he found that in different periods, the non-traded goods sector in different countries had the same productivity growth rate, therefore productivity catch-up effect of trade goods sector would cause the real exchange rate rise.…”

Section: Introductionmentioning

confidence: 99%

The Trade Structure of the Total Manufactured Goods: A New Perspective of Research on the RMB Real Exchange Rate Model

Zhu

Wu²,

Chen³

et al. 2014

IJEF

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Different from the traditional researches only focus on the relationship between the real exchange rate and trade balance, terms of trade, gross domestic product. This paper led the relevance between real exchange rate and trade structure Balassa-Samuelson effect. From the perspective of the total manufactured goods trade structure, an empirical study was done with annual data 1981-2012 by co-integration technique. The results showed that China's total trade structure had the co-integration relationship with the real exchange rate, and it had a more obvious effect on the incidence and model fitting. So four basic economic factors were chosen which were the variables of aggregate trade structure, trade conditions, openness, monetary supply, these constructed RMB equilibrium real exchange rate estimation model. It would give theoretical supports to exploration of RMB real exchange rate.

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The Balassa‐Samuelson Model: A General‐Equilibrium Appraisal*

Cited by 167 publications

References 21 publications

The impact of market regulations on intra-European real exchange rates

The impact of market regulations on intra-European real exchange rates

The Penn effect within a country: evidence from Japan

The Trade Structure of the Total Manufactured Goods: A New Perspective of Research on the RMB Real Exchange Rate Model

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