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- Title
The Balassa-Samuelson Hypothesis and Oil Price Shocks in a Small Open Economy: Evidence from Cyprus.
- Authors
Pattichis, Charalambos; Kanaan, Mona
- Abstract
Focusing on a small open economy, this paper provides very supportive evidence for the Balassa- Samuelson productivity-bias proposition. Using a battery of tests we show that a positive and significant long run relationship exists between the relative price of nontraded goods and real income per capita. An implication of this result is that the prices of services in Cyprus will rise, if EU membership leads to income convergence with the rest of the EU. We have, furthermore, demonstrated that Rogoff's hypothesis, that real oil price changes negatively affect the price of nontradables, is supported by the empirical results.
- Subjects
CYPRUS; CYPRUS economic conditions; PETROLEUM industry; PETROLEUM product sales &; prices; EUROPEAN Union; INCOME
- Publication
Open Economies Review, 2004, Vol 15, Issue 1, p45
- ISSN
0923-7992
- Publication type
Article
- DOI
10.1023/B:OPEN.0000009424.34810.0a