The Impact of Sectoral Productivity Differentials on Real Exchange Rate Changes
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I measured the Balassa-Samuelson effect in the real exchange rate changes between the US and its trading counterparts of the UK, Japan, Hong Kong and Korea, using the MSE decomposition technique from Engel (1999). Empirical findings from the data of the 4 pairs of the US vs. the UK from January 1988 through December 2010, the US vs. Japan from January 1980 through December 2010, the US vs. Hong Kong from January 1976 through December 2001, and the US vs. Korea from January 1985 through December 2010 are as follows: j the MSE shares of the tradables price changes in real exchange rate changes for 3 pairs except the pair of the US and Hong Kong were overwhelmingly large, accounting for more than 90% of real exchange rate changes as in Engel (1999). The MSE shares of the non-tradables component in the real exchange rate changes between the US and fast-growing countries such as Hong Kong and Korea were much greater than those in the real exchange rates between the US and developed countries such as the UK and Japan, and move in line with the sectoral growth differentials between countries. l The real exchange rate changes between the US and Hong Kong were accounted for mainly by the sectoral inflation differentials across the US and Hong Kong: approximately 70% was explained at the beginning of the sample period and 25% at the end of the sample period. I conclude that there exists the Balassa-Samuelson effect in the real exchange rate changes for the pairs of the countries that have significant differences in sectoral growth differentials like the pairs of developed and fast growing countries such as Hong Kong and Korea.
Abstract
I measured the Balassa-Samuelson effect in the real exchange rate changes between the US and its trading counterparts of the UK, Japan, Hong Kong and Korea, using the MSE decomposition technique from Engel (1999). Empirical findings from the data of the 4 pairs of the US vs. the UK from January 1988 through December 2010, the US vs. Japan from January 1980 through December 2010, the US vs. Hong Kong from January 1976 through December 2001, and the US vs. Korea from January 1985 through December 2010 are as follows: j the MSE shares of the tradables price changes in real exchange rate changes for 3 pairs except the pair of the US and Hong Kong were overwhelmingly large, accounting for more than 90% of real exchange rate changes as in Engel (1999). The MSE shares of the non-tradables component in the real exchange rate changes between the US and fast-growing countries such as Hong Kong and Korea were much greater than those in the real exchange rates between the US and developed countries such as the UK and Japan, and move in line with the sectoral growth differentials between countries. l The real exchange rate changes between the US and Hong Kong were accounted for mainly by the sectoral inflation differentials across the US and Hong Kong: approximately 70% was explained at the beginning of the sample period and 25% at the end of the sample period. I conclude that there exists the Balassa-Samuelson effect in the real exchange rate changes for the pairs of the countries that have significant differences in sectoral growth differentials like the pairs of developed and fast growing countries such as Hong Kong and Korea.
참고문헌 (13)
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