Economic Change and Restructuring

, Volume 50, Issue 1, pp 79–93 | Cite as

Symmetry, proportionality and productivity bias hypothesis: evidence from panel-VAR models



By imposing symmetry and proportionality conditions and using the asymptotic theory of panel-VAR models, this study examines the behavior of real exchange rates and productivity bias hypothesis for New Zealand vis-a-vis her major trading partners and the proposed free trade area. The evidence clearly rejects the strong version of the PPP hypothesis but the weak version of the PPP hypothesis receives some support. The findings also indicate that productivity differentials among countries are one of the major sources that contribute to the deviation of the PPP-based exchange rate from the equilibrium rate. Policy implications for the proposed free trade agreement are offered.


Likelihood-based panel cointegration Productivity bias hypothesis PPP Panel rank test Symmetry 

JEL Classification

C32 F31 E31 



The author would like to thank two anonymous referees for their valuable comments and suggestions. Remaining errors are my responsibility.


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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.School of Business, Engineering, and ScienceHalmstad UniversityHalmstadSweden

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