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Time-Series Support for Balassa's Productivity-Bias Hypothesis: Evidence from Korea

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Author Info
Bahmani-Oskooee, Mohsen
Rhee, Hyun-Jae

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Abstract

In this paper we use the Johansen and Juselius cointegration technique and quarterly data over the period 1979-1993 to test the productivity-bias hypothesis between Korea and four of its major trading partners (Germany, Japan, the United Kingdom, and the United States). The results show that in all four cases the deviation of purchasing-power parity (PPP) from the equilibrium exchange rate has a long-run relationship with the productivity ratios, supporting the notion that as Korea becomes relatively more productive, the Korean won appreciates in real terms. Copyright 1996 by Blackwell Publishing Ltd.

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Publisher Info
Article provided by Blackwell Publishing in its journal Review of International Economics.

Volume (Year): 4 (1996)
Issue (Month): 3 (October)
Pages: 364-70
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Handle: RePEc:bla:reviec:v:4:y:1996:i:3:p:364-70

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  1. Imed Drine & Christophe Rault, 2005. "Can the Balassa-Samuelson theory explain long-run real exchange rate movements in OECD countries?," Applied Financial Economics, Taylor and Francis Journals, vol. 15(8), pages 519-530, May. [Downloadable!] (restricted)
  2. Menzie D. Chinn, 1998. "On the Won and Other East Asian Currencies," NBER Working Papers 6671, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Menzie D. Chinn, 1998. "Before the Fall: Were East Asian Currencies Overvalued?," NBER Working Papers 6491, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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