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Symmetry, proportionality and productivity bias hypothesis: evidence from panel-VAR models

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  • Manuchehr Irandoust

    () (Halmstad University)

Abstract

Abstract By imposing symmetry and proportionality conditions and using the asymptotic theory of panel-VAR models, this study examines the behavior of real exchange rates and productivity bias hypothesis for New Zealand vis-a-vis her major trading partners and the proposed free trade area. The evidence clearly rejects the strong version of the PPP hypothesis but the weak version of the PPP hypothesis receives some support. The findings also indicate that productivity differentials among countries are one of the major sources that contribute to the deviation of the PPP-based exchange rate from the equilibrium rate. Policy implications for the proposed free trade agreement are offered.

Suggested Citation

  • Manuchehr Irandoust, 2017. "Symmetry, proportionality and productivity bias hypothesis: evidence from panel-VAR models," Economic Change and Restructuring, Springer, vol. 50(1), pages 79-93, February.
  • Handle: RePEc:kap:ecopln:v:50:y:2017:i:1:d:10.1007_s10644-016-9185-y
    DOI: 10.1007/s10644-016-9185-y
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    More about this item

    Keywords

    Likelihood-based panel cointegration; Productivity bias hypothesis; PPP; Panel rank test; Symmetry;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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