اختبار فرضية أثر بالاسا-صامويلسون Balassa-Samuelson Effect في الاقتصاد المصري في الفترة 1980-2018

Abstract EN

This paper tests the Balassa-Samuelson effect (B-S effect) in the Egyptian economy from 1980 to 2018.

this hypothesis states that when the country tries to catch up with the economically developed countries, most of the productivity gains appear in the sector producing tradable goods.

since the prices of these goods are determined in the global markets, the relatively accelerated productivity growth in these sectors will lead to an escalation of wages, and it will also put upward pressure on wages in the non-tradable sectors.

however, the non-tradeable sectors suffer from a lower productivity growth compared to the tradable sectors, and therefore if the non-tradeable sectors respond to this increasing pressure on wages, they turn into unprofitable sectors, and to continue working, they must raise prices of their products rapidly.

accordingly, the reaction of the supply side to the increase in productivity in the tradable sectors is the rise in the price level or inflation rates, which in turn leads to an appreciation of the real exchange rate.

using the autoregressive distributed lags model (ARDL), the results confirm that Balassa-Samuelson effect cannot be rejected in Egypt in the long run, it is rejected in the short run.

also, it provides some policy implications by which policy makers can face the real exchange rate appreciation and its harmful impact on the economy competitiveness.