The Balassa-Samuelson Hypothesis and Oil Price Shocks in a Small Open Economy: Evidence from Cyprus
Focusing on a small open economy, this paper provides very supportive evidence for the Balassa-Samuelson productivity-bias proposition. Using a battery of tests we show that a positive and significant long run relationship exists between the relative price of nontraded goods and real income per capita. An implication of this result is that the prices of services in Cyprus will rise, if EU membership leads to income convergence with the rest of the EU. We have, furthermore, demonstrated that Rogoff's hypothesis, that real oil price changes negatively affect the price of nontradables, is supported by the empirical results. Copyright Kluwer Academic Publishers 2004
Volume (Year): 15 (2004)
Issue (Month): 1 (January)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/international+economics/journal/11079/PS2|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Eitrheim, Oyvind & Terasvirta, Timo, 1996.
"Testing the adequacy of smooth transition autoregressive models,"
Journal of Econometrics,
Elsevier, vol. 74(1), pages 59-75, September.
- Eitrheim, Øyvind & Teräsvirta, Timo, 1995. "Testing the Adequacy of Smooth Transition Autoregressive Models," SSE/EFI Working Paper Series in Economics and Finance 56, Stockholm School of Economics.
- Wolff, Christian C P, 1987. "Time-Varying Parameters and the Out-of-Sample Forecasting Performance of Structural Exchange Rate Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(1), pages 87-97, January.
- Pesaran, M. H. & Shin, Y. & Smith, R. J., 1996. "Testing for the 'Existence of a Long-run Relationship'," Cambridge Working Papers in Economics 9622, Faculty of Economics, University of Cambridge.
- Jose De Gregorio & Alberto Giovannini, 1993.
"International Evidence on Tradables and Nontradable Inflation,"
NBER Working Papers
4438, National Bureau of Economic Research, Inc.
- De Gregorio, Jose & Giovannini, Alberto & Wolf, Holger C., 1994. "International evidence on tradables and nontradables inflation," European Economic Review, Elsevier, vol. 38(6), pages 1225-1244, June.
- Holger C. Wolf & Alberto Giovannini & Jose De Gregorio, 1994. "International Evidenceon Tradables and Nontradables Inflation," IMF Working Papers 94/33, International Monetary Fund.
- Jose De Gregorio & Alberto Giovannini & Holger C. Wolf, 1993. "International Evidence on Tradables and Nontradables Inflation," Working Papers 93-17, New York University, Leonard N. Stern School of Business, Department of Economics.
- repec:crs:wpaper:9645 is not listed on IDEAS
- Irving B. Kravis & Robert E. Lipsey, 1977.
"Price Behavior in the Light of Balance of Payments Theories,"
NBER Working Papers
0181, National Bureau of Economic Research, Inc.
- Kravis, Irving B. & Lipsey, Robert E., 1978. "Price behavior in the light of balance of payments theories," Journal of International Economics, Elsevier, vol. 8(2), pages 193-246, May.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
- Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Patrick K. Asea, 1994. "The Balassa-Samuelson Model: A General Equilibrium Appraisal," UCLA Economics Working Papers 709, UCLA Department of Economics.
- Heston, Alan & Nuxoll, Daniel A & Summers, Robert, 1994. "The Differential-Productivity Hypothesis and Purchasing-Power Parties: Some New Evidence," Review of International Economics, Wiley Blackwell, vol. 2(3), pages 227-43, October.
- Stephen B. DeLoach, 1997. "Do Relative Prices of Non-traded Goods Determine Long-Run Real Exchange Rates?," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 891-909, November.
- Asea, Patrick K & Mendoza, Enrique G, 1994. "The Balassa-Samuelson Model: A General-Equilibrium Appraisal," Review of International Economics, Wiley Blackwell, vol. 2(3), pages 244-67, October.
- Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
- Bahmani-Oskooee, Mohsen & Rhee, Hyun-Jae, 1996. "Time-Series Support for Balassa's Productivity-Bias Hypothesis: Evidence from Korea," Review of International Economics, Wiley Blackwell, vol. 4(3), pages 364-70, October.
- Bahmani-Oskooee, Mohsen & Niroomand, Farhang, 1996. "A Reexamination of Balassa's Productivity Bias Hypothesis," Economic Development and Cultural Change, University of Chicago Press, vol. 45(1), pages 195-204, October.
- Bahmani-Oskooee, Mohsen & Nasir, Abm, 2001. "Panel Data and Productivity Bias Hypothesis," Economic Development and Cultural Change, University of Chicago Press, vol. 49(2), pages 395-402, January.
- Hendry, David F. & Pagan, Adrian R. & Sargan, J.Denis, 1984. "Dynamic specification," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 18, pages 1023-1100 Elsevier.
When requesting a correction, please mention this item's handle: RePEc:kap:openec:v:15:y:2004:i:1:p:45-56. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.