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The impact of Productivity Difference Among Sectors on Inflation and Real Exchange Rate in Turkey

Author

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  • Omer Ozcicek

    () (Gaziantep University)

Abstract

This paper empirically tests the Balassa-Samuelson effect in Turkey. According to Balassa-Samuelson hypothesis, the productivity in tradable sectors increase faster than the productivity in non-tradable which causes a lower increase in the price level of tradable goods. This mechanism in general generates a higher inflation in the country. As aresult of this inflationary effect the real exchange rate appreciates. This study presets some supportive evidences about the existence of this hypothesis in Turkey. Time series analysis show that relative productivities have some effect on relative prices, and real exchange rate between Turkey and Germany, relative price levels of Turkey and Germany are cointegrated as the Balassa-Samuelson conjecture foresees.

Suggested Citation

  • Omer Ozcicek, 2006. "The impact of Productivity Difference Among Sectors on Inflation and Real Exchange Rate in Turkey," Anadolu University Journal of Social Sciences, Anadolu University, vol. 6(1), pages 145-158, June.
  • Handle: RePEc:and:journl:v:6:y:2006:i:1:p:145-158
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    File URL: http://www.anadolu.edu.tr/arastirma/hakemli_dergiler/sosyal_bilimler/pdf/2006-1/sos_bil.8.pdf
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    More about this item

    Keywords

    Nominal exchange rates; inflation; causality.;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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