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ARDL Approach to Test the Productivity Bias Hypothesis

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  • Mohsen Bahmani‐Oskooee
  • A. B. M. Nasir

Abstract

The productivity bias hypothesis states that a relatively more productive country should experience a real appreciation of its currency. Most studies in the literature that have tested the hypothesis have employed cross‐sectional data. Only a few studies have used time‐series data and they have tested the hypothesis for only a small number of countries. In this paper the authors test the hypothesis by using time‐series data over the 1960–90 period for a sample of 44 countries and with a relatively new method of cointegration known as the ARDL approach. For most countries there is strong evidence supporting the hypothesis.

Suggested Citation

  • Mohsen Bahmani‐Oskooee & A. B. M. Nasir, 2004. "ARDL Approach to Test the Productivity Bias Hypothesis," Review of Development Economics, Wiley Blackwell, vol. 8(3), pages 483-488, August.
    • Handle: RePEc:bla:rdevec:v:8:y:2004:i:3:p:483-488
    DOI: 10.1111/j.1467-9361.2004.00247.x
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    References listed on IDEAS

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    1. Pesaran, M.H. & Shin, Y., 1995. "An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis," Cambridge Working Papers in Economics 9514, Faculty of Economics, University of Cambridge.
    2. Joseph Grunwald & Jorge Salazar-Carrillo, 1972. "Economic Integration, Rates of Exchange, and Value Comparisons in Latin America," NBER Chapters, in: International Comparisons of Prices and Output, pages 227-286, National Bureau of Economic Research, Inc.
    3. Menzie D. Chinn, 2000. "The Usual Suspects? Productivity and Demand Shocks and Asia–Pacific Real Exchange Rates," Review of International Economics, Wiley Blackwell, vol. 8(1), pages 20-43, February.
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