Productivity and the New Zealand dollar - Balassa-Samuelson tests on sectoral data

Release date
01/06/2013
Reference
AN2013/01
Author
Daan Steenkamp
ISSN
2230‐5505
The Balassa-Samuelson hypothesis suggests that countries with a weak relative productivity performance should, over time, see a low or falling real exchange rate. This note uses detailed sectoral data to test the hypothesis over the period 1978-2006 and also fails to find any evidence of the expected effect.