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An empirical test of the Balassa-Samuelson hypothesis: Evidence from eight middle-income countries in Africa

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  • Njindan Iyke, Bernard
  • Odhiambo, Nicholas M.

Abstract

The paper tests the validity of the Balassa-Samuelson hypothesis (BSH) using the within-effects and the dynamic panel generalised methods of moment (GMM) techniques for a panel of eight middle-income African countries over the period 1960–2009. We selected these countries because they exhibited a mixture of relative productivity growth and real exchange rate misalignment that fits the characterization of the BSH well. The results strongly support the BSH for this group of countries. The results are valid even after we controlled for potentially omitted variables and endogeneity. The implication is that as these countries become more productive, their currencies appreciate in real terms.

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  • Njindan Iyke, Bernard & Odhiambo, Nicholas M., 2017. "An empirical test of the Balassa-Samuelson hypothesis: Evidence from eight middle-income countries in Africa," Economic Systems, Elsevier, vol. 41(2), pages 297-304.
    • Handle: RePEc:eee:ecosys:v:41:y:2017:i:2:p:297-304
    DOI: 10.1016/j.ecosys.2016.10.001
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    Cited by:

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    3. Florian Morvillier, 2020. "Robustness of the Balassa-Samuelson effect: evidence from developing and emerging economies," EconomiX Working Papers 2020-18, University of Paris Nanterre, EconomiX.
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    6. Bahmani-Oskooee, Mohsen & Nouira, Ridha, 2021. "The nonlinear ARDL approach and productivity bias hypothesis: Evidence from 68 countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 80-89.

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