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

22 Pages Posted: 3 Mar 2006

See all articles by Boileau Loko

Boileau Loko

International Monetary Fund (IMF)

Anita Tuladhar

affiliation not provided to SSRN

Date Written: June 2005

Abstract

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 factslow labor productivity growth and a trend real depreciationsuggest 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.

Keywords: Real exchange rate, productivity, Balassa-Samuelson

JEL Classification: F31, F41

Suggested Citation

Loko, Boileau and Tuladhar, Anita, Labor Productivity and Real Exchange Rate: The Balassa-Samuelson Disconnect in the Former Yugoslav Republic of Macedonia (June 2005). IMF Working Paper, Vol. , pp. 1-22, 2005. Available at SSRN: https://ssrn.com/abstract=887982

Boileau Loko (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Anita Tuladhar

affiliation not provided to SSRN

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