Japan's inflation under the Bretton Woods system: How large was the Balassa-Samuelson effect?
AbstractJapan's real exchange rate appreciation during the post-WWII manufacturing-led growth period has been regarded as a classical example of the Balassa-Samuelson effect. We choose the most conspicuous sub-period--1956-1970--to confirm the effect. Japan was in a rapid growth period under the U.S. dollar peg (real GDP growth, 9.7% per annum). The nominal anchor was weak as Japan's inflation rate (GDP deflator-based, 5.4%) was markedly higher than the U.S. rate (2.6%) during the 15-year period. The decomposition of the annual 2.7% (geometric) Japan-U.S. inflation rate gap (real exchange rate appreciation of the Japanese yen) reveals that the Balassa-Samuelson effect accounted for 0.7%; most of the real exchange rate appreciation (1.7%) was attributed to greater price increases in Japan's tradables. Although Japan's tradable sector achieved high TFP growth, the joint effect of the tradable-nontradable TFP growth difference between the two economies was too small to generate a sizable Balassa-Samuelson effect. Japan's example may suggest that even in rapidly growing economies, the magnitude of the effect in long-run real exchange rate appreciation is generally modest.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Asian Economics.
Volume (Year): 21 (2010)
Issue (Month): 2 (April)
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Web page: http://www.elsevier.com/locate/asieco
Inflation Fixed exchange rate Real exchange rate appreciation Purchasing power parity The Balassa-Samuelson effect;
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- Gómez Aguirre Mario & Rodríguez Chávez José Carlos, 2013. "El efecto Harrod-Balassa-Samuelson. El caso de México," Contaduría y Administración:Revista Internacional, Accounting and Management: International Journal, vol. 58(3), pages 121-147, julio-sep.
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