Proceedings of the 12th International Academic Conference, Prague

BALASSA–SAMUELSON EFFECT IN IRAN

SALEH GHAVIDEL, MAHMOUD MAHMOUDZADEH, HAMIDEH RADFAR

Abstract:

Deviations from purchasing power parity because a deviation of productivity is Balassa–Samuelson effect. The Balassa–Samuelson effect depends on inter-country differences in the relative productivity of the tradable and non-tradable sectors. According to this hypothesis, Imai (2010) make a model and measurement Balassa–Samuelson effect in Japan during 1970-1955 when exchange rate in Japan is fixed. In this paper we measurement Balassa–Samuelson effect in Iran economic. The result shows that Balassa–Samuelson effect in Iran is -2.1. Then devaluation of the national currency in Iran according to Balassa–Samuelson effect would be equal to 2.1 in annual, while devaluation of the national currency in Iran 13% in a year.

Keywords: Balassa–Samuelson effect; purchasing power parity; productivity gap; tradable and non-tradable sectors

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