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Productivity Bias Hypothesis and The Purchasing Power Parity: a review article
Author(s) -
BahmaniOskooee Mohsen,
Nasir ABM
Publication year - 2005
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1111/j.0950-0804.2005.00261.x
Subject(s) - purchasing power parity , economics , econometrics , relative purchasing power parity , productivity , panel data , parity (physics) , exchange rate , macroeconomics , physics , particle physics
. Productivity differentials among countries are said to be one of the major sources that contribute to the deviation of the Purchasing Power Parity‐based exchange rate from the equilibrium rate, hence the productivity bias hypothesis. Prior to last review article on the productivity bias hypothesis in 1976, almost all studies relied upon cross‐sectional regression analysis. Since then, two groups of empirical studies have emerged. While one group has employed time‐series data, the other one has used panel data. These two later groups have provided more support to the hypothesis than the earlier cross‐sectional studies. This paper reviews and criticizes each group separately and provides tables that summarize main features of each study.