Labor Productivity and Real Exchange Rate : The Balassa-Samuelson Disconnect in the former Yugoslav Republic of Macedonia

Author/Editor:

Boileau Loko ; Anita Tuladhar

Publication Date:

June 1, 2005

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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. 05/113

Subject:

English

Publication Date:

June 1, 2005

ISBN/ISSN:

9781451861327/1018-5941

Stock No:

WPIEA2005113

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

21

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