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We sketch a model that shows how skill-biased technological change may reverse the classic Balassa-Samuelson effect, leading to a negative relationship between productivity in the tradable sector and the real exchange rate. In a small open economy, export goods are produced with high-skilled...
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primarily from problems concerning the data required for the estimation of the Balassa-Samuelson effect. Thus, in interpreting … the findings, the main focus is a direct estimation of the relationship between relative price levels and economic …
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