Does the Balassa-Samuelson Theory Explain the Link Between Relative Population Growth and Purchasing Power Parity?
MetadataShow full item record
Relative population growth affects relative prices through the so-called Balassa–Samuelson (BS) mechanism and that in turn impacts PPP. This paper empirically investigates the relationship between the PPP exchange rate and relative population growth in a panel of 80 selected countries. Following the BS hypothesis, this paper argues that relative population growth affects nominal wages that impact price levels and thereby impacts PPP. Using panel cointegration and fully modified ordinary least square (FMOLS), the empirical results show that there is a stable relationship between PPP exchange rate and relative population growth in the long run. These empirical findings suggest that population growth have an important role in exchange rate determination through PPP.
Electronic version of an article published in The Singapore Economic Review, Volume 58, Issue 01, March 2013, Pages, 1350007 (19 pages), DOI:10.1142/S0217590813500070 ©Copyright World Scientific Publishing Company. http://www.worldscientific.com/worldscinet/ser
Showing items related by title, author, creator and subject.
Hassan, K.; Salim, Ruhul (2011)Purpose – The aim of this paper is to examine the relationship between relative population growth and purchasing power parity (PPP) exchange rate for a panel of 80 countries. Design/methodology/approach – Panel unit root ...
Village-Based Marine Resource Use and Rural Livelihoods:Kimbe Bay, West New Britain, Papua New GuineaKoczberski, Gina; Curry, George; Warku, J.; Kwam, C. (2006)This report presents the findings of a socio-economic study conducted in six coastal villages in Kimbe Bay, West New Britain Province, Papua New Guinea. From west to east around the Bay the study villages were Kulungi, ...
Florentine, Singarayer K. (1999)The WA coolibah tree, Eucalyptus victrix L. Johnson & K. Hill forms an unique and pristine woodland in the Fortescue Valley, in the Pilbara district of Western Australia. Until recently, no research had been done on E. ...