Lossani, Marco Economia dei mercati emergenti by Emilio Colombo(Book) Economia monetaria internazionale: elementi di base by Emilio Colombo. Colombo-Lossani: Economia dei mercati Emergenti, Carocci, Colombo- Lossani: Economia monetaria internazionale, Carocci, Type of exam. written. Economia monetaria internazionale: elementi di base / Emilio Colombo, Marco Lossani. – Roma: Carocci, · Economia monetaria internazionale / Paul De.
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The Balassa-Samuelson BS effect analyses the relationship between the increase in productivity realised in the traded goods sector and the real exchange rate appreciation.
It owes its name to the important contributions made by Bela Balassa and Paul Samuelson In particular, it captures the impact of higher productivity growth in terms of internationally traded goods — typically manufactures — on the relative prices and then on the real equilibrium exchange rate Qdefined precisely by the ratio between the price index of tradable goods P C and the price index of non-traded goods P N.
In general, the BS effect econoia why the prices of tradable goods tend to converge net of transaction prices at the international level, while this is not true for the prices of non-tradable goods, which indeed tend to be higher in richer countries or in countries where the labour productivity in the tradable sector is higher. The underlying logic to the BS effect can be summarized as follows.
In growing economies, it is internazjonale to consider that productivity growth is concentrated precisely in the production of these goods.
This leads to an increase in wages that is not necessarily accompanied by an increase in prices.
Since the LOOP will continue to be respected and the nominal exchange llossani remains constant, the joint work of these forces results in an appreciation of the real exchange rate. The experience of Japan in the post-conflict phase is often cited as an example of the existence of the BS effect.
Economia monetaria internazionale. Elementi di base – Emilio Colombo, Marco Lossani – Google Books
In order to illustrate the mechanism that links the growth of labour productivity pml to the dynamics of the real exchange rate Qwe consider an open economy with two sectors, that of traded goods whose production level is indicated by Y C and non-traded goods whose production level is indicated by Y N.
Both productions use two inputs, capital and labour, which are internationally immobile. This assumption implies interrnazionale equality of the wages paid in the two sectors within the same country. Both sectors are perfectly competitive; therefore any input receives a remuneration equal to its marginal product. The graph on the left shows: The graph on the right shows: In the graph on the left, there is a coloombo neutral” translation in the production possibility frontier: In the graph on the right, the curve pml C shifts to the right.
The changed conditions in the labour market result in an increase in the equilibrium wage that implies a consequent increase in the level of prices of non-traded goods P N.
On the contrary, the level of prices of tradable goods P C does not change, since the increase in wages is accompanied by an increase coolmbo productivity. The increase of P NP C equal, entails: Balassa also stressed an important empirical regularity. The comparison between developed and developing countries shows that productivity differentials are much higher in the tradable goods sector than in the non-traded goods sector. Lossanj consider a scenario that includes advanced economies and developing economies.
It seems logical to assume that the differential in favour of the first in terms of labour productivity is greater in the tradable goods sector rather than in the non-tradable goods sector. This result has been corroborated by many empirical analyses.
Heston, Nuxoll and Summers consider the price differential of tradable and non-tradable goods by using data from the International Comparison Program ICP.
ECONOMICS AND ECONOMETRICS OF INTERNATIONAL FINANCE – 1
In a similar analysis, but conducted on data from Asian countries, Chinn illustrated how both phenomena – demand factor and BS effect – explain little about the movements of the real exchange rate. More recently, Lothian and Taylorby analyzing data on the U.
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