THE EFFECT OF LABOR PRODUCTIVITY ON REAL EXCHANGE RATE: EVIDENCE FROM CZECH REPUBLIC, HUNGARY, POLAND AND SLOVAKIA

• Authors: Pošta Vit
• Languages of publication: EN

Abstracts

EN

The paper builds on an inter-temporal model of an open economy to formulate the hypothesis of the dependence of real exchange rate on labour productivity. The model is formulated under those assumption on which rests the Balassa-Samuelson theorem. The hypothesis is tested using co-integration technique and vector error correction model. Usually, testing the Balassa-Samuelson effect gives mixed results, sometimes finding the opposite reaction of the real exchange rate to the one predicted by the Balassa-Samuelson theorem, pointing to the restrictive nature of the assumptions on which it is based. The analysis shows a little supportive evidence for the Balassa-Samuelson effect. However, according to the analysis the effect of labour productivity on the real exchange rate can hardly be considered as clear-cut as predicted by the Balassa-Samuelson theorem.

Keywords

EN

BALASSA-SAMUELSON EFFECT; CO-INTEGRATION; CZECH REPUBLIC; HUNGARY; INTER-TEMPORAL MODEL; LABOR PRODUCTIVITY; POLAND; SLOVAKIA

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Institute of Slovak and World Economics and Institute for Forecasting, Slovak Academy of Sciences
• Journal: Ekonomický časopis (Journal of Economics)
• Year: 2010
• Volume: 58
• Issue: 7
• Pages: 657-676
• Document type: ARTICLE

Contributors

author

Pošta Vit

• University of Economics, Prague, Fakulty of Business Administration, Depart-ment of Microeconomics, ul. W. Churchilla 4, 130 67 Prague 3, Czech Republic

• Vit Posta, Ekonomicka univerzita Praha, Fakulta podnikohospodarska, Katedra mikroekonomiky, ul. W. Churchilla 4, 130 67 Praha 3, Czech Republic

Identifiers

CEJSH db identifier

11SKAAAA100928