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

June 1, 2005

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Boileau Loko, and Anita Tuladhar. Labor Productivity and Real Exchange Rate: The Balassa-Samuelson Disconnect in the former Yugoslav Republic of Macedonia, (USA: International Monetary Fund, 2005) accessed November 21, 2024

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.

Subject: Labor productivity, Productivity, Purchasing power parity, Real effective exchange rates, Real exchange rates

Keywords: Exchange rate, WP

Publication Details

Pages:

21
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/113
Stock No:

WPIEA2005113
ISBN:

9781451861327
ISSN:

1018-5941

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