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Testing The Productivity Bias Hypothesis In Middle East Countries, Ferda Halicioglu, Natalya Ketenci

Topics in Middle Eastern and North African Economies

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 …