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This study aims to explore the long-run equilibrium relationship between India’s real exchange rate and sectoral productivity trends using internationally comparable KLEMS databases on productivity for India, China, Euro area, the USA, the UK and Japan.

This study uses pooled mean group estimations for panel data suggested by Pesaran et al. (1999). This method is chosen because of the presence of variables with different orders of integration.

The results find support for an “extended” Balassa–Samuelson (BS) hypothesis which allows labour market frictions that does not allow for wage equalisation between traded and non-traded sectors within a country. This mechanism continues to find some support when we separate out distribution sector that comprises wholesale and retail trade in the domestic services sector. The empirical evidence suggests that India’s real exchange rate is anchored to domestic fundamentals and is closely aligned to its fair value over a medium to long-time horizon.

To the best of the authors’ knowledge, unlike the available literature, which uses aggregate per-capita income as proxy for a country’s productivity growth, this paper perhaps makes the first attempt to validate the BS hypothesis by accounting for productivity differential at the sectoral levels using KLEMS data across countries. Moreover, this study takes the country’s productivity improvement rather than using a basket of countries, a prevalent practice in the literature. While this paper uses India’s data, which witnessed a prolonged appreciation in its real effective exchange rate and rapid technological progress, the authors believe its findings and policy implications could be applicable to the similar emerging market economies.

This is a theoretical paper in the field of international macroeconomics. The purpose of this paper is to focus on a dynamic interaction between current account imbalance and unemployment in response to some policy-induced shocks for a small open economy under a flexible exchange rate.

The paper uses a two-sector framework: one sector is traded and another is the non-traded sector that is subject to an effective demand constraint. The current account imbalance arises due to the discrepancy between production of traded goods, household consumption of traded goods and government purchases of importables. The authors keep the asset structure simple by considering only domestic currency and foreign bonds that are imperfect substitutes. The paper considers a standard methodology of dynamic adjustment process involving change in foreign exchange reserves and exchange rate under perfect foresight. The saddle path properties of the equilibrium are also examined.

The results of comparative static exercises depend on a set of structural features of a developing country, which include asset substitutability, wage price rigidity and sectoral asymmetries. The paper shows that expansionary monetary policy, balanced budget fiscal expansion and financial liberalization have an ambiguous effect on the current account balance, foreign exchange reserves, non-traded sector and the level of employment.

The existence of Keynesian unemployment with fixed prices is the key ingredient of this paper. The paper introduces the problem of effective demand to analyze the dynamics of current account balance and exchange rate, which, in turn, determine the sectoral composition of output and level of employment.

This article presents a general equilibrium model capable of assessing the impact of foreign price shocks on the real side of the oil‐based developing economies. The theoretical model departs from previous work in this area at least in that (1) the model takes into account endogenous income and price responses in all sectors of the economy; (2) it has two traded goods (exports and imports) and a non‐traded good; (3) it explicitly addresses the inherent open and small economic nature of developing countries; and (4) besides adjustments in the endogenous domestic prices, the model also allows for other structural adjustments. As such, the model combines the neoclassical macro theory with the structural micro approach. Empirical evidence deduced from an important oil‐based developing economy (Saudi Arabia) appears quite consistent with the model theoretical implications.

International tourism has experienced a substantial growth during the second half of twentieth century. Tourism development can contribute substantially to the reduction of poverty problem by creating new employment opportunities. The purpose of this paper is to analyse the effect of tourism development on unemployment problem using an efficiency wage framework.

The authors developed a two-sector two-factor static competitive general equilibrium model of a less-developed open economy called South with an imported traded goods sector and with a non-traded tourism service sector, and with two factors, capital and labour. Labour is measured in efficiency unit; there exists unemployment in the labour market which is explained by the efficiency wage hypothesis. The authors also consider extensions of the basic model by introducing an exportable traded goods sector as well as sector-specific capital in the tourism sector.

The authors show that, with perfect intersectoral mobility of capital and with only one traded good, tourism development in South lowers unemployment rate and raises national income. However, this tourism development neither affects unemployment rate nor national income in South, in the mobile-capital model when there are two traded goods. When tourism sector uses sector-specific capital but capital is mobile between two traded goods sectors, tourism development keeps the unemployment rate unchanged but raises national income in South.

There exists a lot of debate about economic benefits of tourism development in a less-developed economy. A few works analyse the economic effects of tourism without developing formal models. However, no existing work analyses the effect on unemployment in an efficiency wage model. Although Harris–Todaro model is of relevance to explain unemployment in low-income countries, efficiency wage models are relevant for middle-income countries.

This article provides a formal framework for the analysis of the impact of international migration in the presence of remittances. The discussion differentiates between temporary and permanent migration and between the effects of remittances that raise investment and those that raise consumption spending in the source country. Changes in prices, income distribution and national welfare are examined.

This study aims to make a comparative study of the applicability of the purchasing power parity (PPP) in selected less developing countries (LDCs) on one hand and European countries on the other hand.

The research design is empirical and ex post facto. This study uses an assortment of co-integration tests and error correction representation. The chosen approach allows for the consideration of long-run elasticities and the dynamics of the short-run adjustment of exchange rates to changes in domestic and foreign prices. Monthly data are used for the period 1980:1 through 2015:12 (i.e. 432 observations).

Results from long-run co-integration analysis, short-run error correction models and persistence profile analysis overwhelmingly confirm the validity of PPP in these two sets of countries regardless the disparity in their relative exchange rate and price characteristics.

Curiously, several of these empirical studies and still many more, have focused their attention on the experiences of industrialized countries, with a few investigations devoted to LDCs. The evidence is even scarcer in Africa. Clearly, the acceptance of any hypothesis as a credible explanation of economic reality hinges on the robustness of the hypothesis across countries with different economic and institutional frameworks.

Knowledge of the extent to which exchange rate and relative prices can be linked in the long run is important for the design and management of inflation and the implementation of monetary policy. For instance, policy actions aimed at stabilizing the domestic economy can obtain results that are, at best, uncertain in the absence of correct characterization of the PPP dynamics. Moreover, structural and macroeconomic adjustment programs implemented in these countries to achieve economic growth and external competitiveness could be unsuccessful if flawed estimates of PPP exchange rates are retained.

Several empirical studies have been done to prove the validity or otherwise of the PPP. Unlike prior authors, this study makes a comparative study of the applicability of the PPP in selected LDC on one hand and European countries.

This article analyses the welfare effect of emigration on a source country whose output consists in part of non‐traded goods but where emigrants make remittances to the source country and the remittances are used solely for consumption. Within this framework, the welfare effect of emigration is indeterminate, depending on the magnitude of remittances. In particular, welfare will fall where remittances merely maintain source country nominal income at its pre‐emigration level. Where remittances are sufficiently large they can compensate for the emigration‐induced disruption of internal trade in internationally non‐traded goods.

This article examines the impact of population age structure on the real exchange rate. Data on a panel of 22 OECD (Organization of Economic Cooperation and Development) countries over 1980–2015 period are used to estimate the empirical model. Using fixed effect model the paper finds that different age cohorts have a significant influence on the real exchange rates in the sample countries. The results are mostly consistent with the theoretical framework discussed in the paper and also with the findings of previous studies in this area. These results have important policy implications given the fact that the population is ageing in almost all the OECD economies these days.

This paper estimates the Effective Rate of Protection (E.R.P.) for Costa Rica, the first time such an estimate has been provided for any Central American Republic. It also employs a new method for calculating each E.R.P. which, it is argued, offers at least a partial solution to the problem of tariff redundancy. The main conclusions are as follows:—

This paper examines the prices of fishery products (an important source of protein for the poor) and drivers of their inter-regional variations in India, where fishery is a critical sector. By explaining regional price differences, we make an attempt to derive policy implications as to how fish price inflation can be controlled.

The paper is primarily based on secondary data provided by the Ministry of Agriculture, Government of India. In the absence of data on inter-regional trade, appropriate indicators are constructed using the gravity model to capture supply side factors that may influence regional price differences. Pooled regressions are carried out for a representative marine and an aquaculture fish variety separately for the period 2011 to 2017.

After controlling for income levels, it is found that marine fish prices can be reduced by improving intra-state transport infrastructure. For reducing the price of aquacultures, it is shown that it is imperative to reduce the distance between producers and consumers.

The study is limited by the availability of data on interstate trade and consumption of fish and has only used prices of representative fish varieties instead of average marine and aquaculture fish prices.

This paper considers trade and value chain based business theories to explain regional price differences. It analyzes the drivers of relative price differences and suggests measures to control them using a gravity model of trade.