This paper examines the purchasing power parity (PPP) theorem adjusted the “productivity-bias hypothesis” or the Balassa-Samuelson effect (Balassa, 1964; Samuelson, 1964) for eight East Asian countries including Japan, New Industrializing Economies (NIE-3: Singapore; Hong Kong, China; and Korea), the ASEAN-3 (Malaysia, Indonesia and the Philippines) and the People’s Republic of China (PRC). This paper applies three methods of analysis i.e. univariate time series, multivariate regression and Johansen multivariate cointegration. The three methods give the same conclusions. First, the PPP hypothesis does not hold in the case of the eight East Asian countries. Second, non-traded goods give significant contribution on the PPP deviation. It is confirmed by the existence of Balassa-Samuelson effect.
Ni Putu Wiwin Setyari, Tri Widodo and M. Edhie Purnawan
Heckscher-Ohlin-Mundell framework suggests that if a country has unexpectedly increased the permanent labour force, there will be a change in the production structure. Increases in the relative proportion of labour-intensive product demand occur and, hence, decrease the need for investment relative to domestic saving, and encourage the current account surplus.
This paper tries to fill the empirical studies gap on the effects of the labour force, especially its utilization in the data panel of ASEAN + 6 countries using the generalized method of moments (GMM) used to capture the unobserved heterogeneity and endogeneity across countries that often arise in a panel data model. The estimation result shows that the labour force has an asymmetric shock and it only affects the country of origin, even when the financial institution deepening as a control variable is included. The analysis also indicates that labour regulations in these countries tend to be rigid because the speed with which the current account adjusts is relatively slow.