Labor Productivity and Real Exchange Rate: The Balassa-Samuelson Disconnect in the former Yugoslav Republic of Macedonia
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Summary:
This paper seeks to investigate the transmission mechanisms linking productivity to the real exchange rate in the former Yugoslav Republic of Macedonia. At first glance, the stylized facts-low labor productivity growth and a trend real depreciation-suggest that a Balassa- Samuelson effect is in play. We find that the relationship between the two is not a result of the traditional Balassa-Samuelson effect. Instead, the depreciation of the real exchange rate reflects mainly the behavior of prices in the tradable sector. We argue that the depreciating real exchange rate may reflect a prolonged transition associated with slow technological growth and the low quality of the country's tradable-goods basket.
Series:
Working Paper No. 2005/113
Subject:
Labor productivity Productivity Purchasing power parity Real effective exchange rates Real exchange rates
English
Publication Date:
June 1, 2005
ISBN/ISSN:
9781451861327/1018-5941
Stock No:
WPIEA2005113
Pages:
21
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