A Study on the Balassa-Samuelson Hypothesis: Evidence from China
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This paper focuses on the linkage among relative labor productivity, real exchange rate and foreign exchange reserve of China as well as the relative labor productivity of U.S. under the Balassa-Samuelson Hypothesis. This paper applies quarterly data from 2000 to 2016. An empirical analysis is conducted using the vector error correction model (VECM). The empirical analysis results show that the Balassa-Samuelson Hypothesis is significant in China in the long run. To be specific, an increase in relative labor productivity (the ratio of the manufacturing industry to the tertiary industry) will result in RMB appreciation. An increase in the relative labor productivity of U.S. (the ratio of the manufacturing industry to the non-farm business sector) will lead to the RMB depreciation. An increase in the foreign exchange reserve (a replacement of the reserve asset) will bring about RMB appreciation.
Abstract
This paper focuses on the linkage among relative labor productivity, real exchange rate and foreign exchange reserve of China as well as the relative labor productivity of U.S. under the Balassa-Samuelson Hypothesis. This paper applies quarterly data from 2000 to 2016. An empirical analysis is conducted using the vector error correction model (VECM). The empirical analysis results show that the Balassa-Samuelson Hypothesis is significant in China in the long run. To be specific, an increase in relative labor productivity (the ratio of the manufacturing industry to the tertiary industry) will result in RMB appreciation. An increase in the relative labor productivity of U.S. (the ratio of the manufacturing industry to the non-farm business sector) will lead to the RMB depreciation. An increase in the foreign exchange reserve (a replacement of the reserve asset) will bring about RMB appreciation.
참고문헌 (12)
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