Real exchange rate movements in developed and developing economies: A reinterpretation of the Balassa-Samuelson hypothesis

Taya Dumrongrittikul

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11 Citations (Scopus)


This article applies panel-data techniques to examine the Balassa-Samuelson hypothesis (BSH) for 33 countries. We introduce a new approach for classifying traded and non-traded industries which allows for country-specific heterogeneity over each industry and changes in classifications across periods. We find that in developed countries, productivity growth in traded goods leads to a real depreciation of the currency, inconsistent with the BSH; however, higher growth countries experience real appreciation. The results of developing countries support the BSH in that higher productivity growth in traded goods leads to real appreciation.
Original languageEnglish
Pages (from-to)537 - 553
Number of pages17
JournalEconomic Record
Issue number283
Publication statusPublished - 2012

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