Topics in Middle Eastern and North African Economies

Document Type

Article

Publication Date

9-2018

Abstract

Divergence of the purchasing power parity from the equilibrium exchange rate is attributed to various factors. Productivity differentials between the countries are said to be one of the main sources, which lead to productivity bias hypothesis. The hypothesis suggests that a relatively more productive country should experience a real appreciation of its currency. This research aims at testing the hypothesis in Middle East countries using the time series data over the period of 1970-2015 and by employing ARDL approach to cointegration. The econometric results support the hypothesis is only in the case of Bahrain, Kuwait and Saudi Arabia. This research also provides policy recommendations on the basis of empirical results.

Journal Title

Topics in Middle Eastern and North African Economies

Publisher

Middle East Economic Association and Loyola University Chicago

Volume

20

Issue

2

Comments

Presentation of the articles in the Topics in Middle Eastern and North African Economies was made possible by a limited license granted to Loyola University Chicago and Middle East Economics Association from the authors who have retained all copyrights in the articles.

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This work is licensed under a Creative Commons Attribution 3.0 License.

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