Productivity bias hypothesis claims that deviation of the PPP based exchange rate from the equilibrium rate is mainly due to productivity differentials among countries. Early studies that employed cross-sectional data in testing the hypothesis provided mixed results. A few time-series studies have provided some support for the hypothesis. This paper relies on panel data and recent advances in panel unit-root and panel cointegration analysis and provides strong results supporting the hypothesis. The results are not sensitive to classification of the world by regions.
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Volume (Year): 31 (2004) Issue (Month): 5 (October) Pages: 448-456 Download reference. The following formats are available: HTML
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