The Role of Productivity in Economic Growth and Equilibrium
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Keywords

Foreign exchange rates, Labor productivity, American dollar.

How to Cite

Olson, O. . (2013). The Role of Productivity in Economic Growth and Equilibrium. Asian Economic and Financial Review, 3(11), 1497–1527. Retrieved from https://archive.aessweb.com/index.php/5002/article/view/1104

Abstract

This study reexamines the evidence for the Balassa-Samuelson effect for the 1985-2007 period. Cointegrating relationships between the real exchange rate and productivity, real price of oil and government spending are estimated using the Johansen and Stock-Watson procedures. The findings show that for each percentage point in the US-Euro area productivity differential there is a three percentage point change in the real dollar/euro valuation. These findings are robust to the estimation methodology, the variables included in the regression, and the sample period. We suggest that economic disequilibrium can result in a decline in economic growth. This study will utilize von Neumann’s “A Model of General Economic Equilibrium” as an economic equilibrium standard.

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