Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/69984 
Authors: 
Year of Publication: 
2013
Series/Report no.: 
CESifo Working Paper No. 4129
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This study reconsiders the well-known cross-country positive association between prices and income by focusing on heterogeneity between the inter-developed-country and inter-developing-country relationships. Empirical results reveal not only that developed and developing countries differ in magnitude of the income effect on prices, but also that they exhibit the positive price-income association for different reasons. Specifically, we find only for the inter-developed-country case that the positive price-income association is attributable, at least partly, to the Balassa-Samuelson productivity differential effect. The idiosyncrasy of the inter-developing-country relationship is not dissolved by controlling for the effects of a variety of real and financial variables.
Subjects: 
Balassa-Samuelson effect
non-traded goods
purchasing power parity
Penn effect
price-income relationship
productivity differential
real exchange rate
JEL: 
F41
F31
E01
Document Type: 
Working Paper
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