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Table 6. 
Channel II: Effect of Undervaluation on Increasing the Relative Productivity of the Tradable Sector
Relative productivity of tradable to nontradable sector(1)(2)
Relative productivity of tradable to 0.792* 0.791* 
nontradable sectort−1 (75.45) (75.41) 
Underval 0.081* 0.159* 
 (6.47) (5.01) 
Fin devt −0.018* −0.020* 
 (−2.69) (−3.00) 
Underval × fin devt  −0.028* 
  (−2.69) 
Dependency ratiot−1 −0.001*** −0.001** 
 (−1.72) (−2.08) 
Trade opennesst−1 0.005 0.006 
 (0.83) (0.91) 
Govt. expenditure sharet−1 −0.089** −0.113* 
 (−2.06) (−2.58) 
Investment sharet−1 0.061 0.052 
 (1.34) (1.15) 
Fixed effects   
Economy fixed effect Yes Yes 
Year fixed effect Yes Yes 
Observations 3,317 3,317 
R2 0.666 0.667 
Relative productivity of tradable to nontradable sector(1)(2)
Relative productivity of tradable to 0.792* 0.791* 
nontradable sectort−1 (75.45) (75.41) 
Underval 0.081* 0.159* 
 (6.47) (5.01) 
Fin devt −0.018* −0.020* 
 (−2.69) (−3.00) 
Underval × fin devt  −0.028* 
  (−2.69) 
Dependency ratiot−1 −0.001*** −0.001** 
 (−1.72) (−2.08) 
Trade opennesst−1 0.005 0.006 
 (0.83) (0.91) 
Govt. expenditure sharet−1 −0.089** −0.113* 
 (−2.06) (−2.58) 
Investment sharet−1 0.061 0.052 
 (1.34) (1.15) 
Fixed effects   
Economy fixed effect Yes Yes 
Year fixed effect Yes Yes 
Observations 3,317 3,317 
R2 0.666 0.667 

GDP = gross domestic product.

Notes:

1. Observations are annual data for the period 1980–2011.

2. Both undervaluation and private credit/GDP are in logarithmic form.

3. t-statistics are in parenthesis.

4. *** = 10% level of statistical significance, ** = 5% level of statistical significance, * = 1% level of statistical significance.

Sources: Authors’ calculations based on World Bank. “World Development Indicators.” http://databank.worldbank.org/data/reports.aspx?source=world-development-indicators; Penn World Tables 8.0. http://www.rug.nl/research/ggdc/data/pwt/

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