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Simultaneity between export and import flows and the Marshall–Lerner condition

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  • Sastre, Luis
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    Abstract

    This paper presents an analytical reformulation of the Marshall–Lerner condition under the assumption that the independence of the GDP from the exchange rate cannot be postulated in open economies in which the foreign trade flow/GDP ratio is high. This paper attempts to analyse how, in open economies in which the export and import flow/GDP ratio is very high, independence between the GDP and the exchange rate is not a plausible assumption, so the traditional version of the Marshall–Lerner condition is not sustained.

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    Bibliographic Info

    Article provided by Elsevier in its journal Economic Modelling.

    Volume (Year): 29 (2012)
    Issue (Month): 3 ()
    Pages: 879-883

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    Handle: RePEc:eee:ecmode:v:29:y:2012:i:3:p:879-883

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    Web page: http://www.elsevier.com/locate/inca/30411

    Related research

    Keywords: Marshall–Lerner condition; Export and import flow simultaneity; Price-elasticities; Cross elasticities;

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    1. Maurice Obstfeld and Kenneth Rogoff., 1994. "The Intertemporal Approach to the Current Account," Center for International and Development Economics Research (CIDER) Working Papers C94-044, University of California at Berkeley.
    2. David Matesanz & Guadalupe Fugarolas, 2009. "Exchange rate policy and trade balance: a cointegration analysis of the Argentine experience since 1962," Applied Economics, Taylor & Francis Journals, vol. 41(20), pages 2571-2582.
    3. Syed Mahmud & Aman Ullah & Eray Yucel, 2004. "Testing Marshall-Lerner condition: a non-parametric approach," Applied Economics Letters, Taylor & Francis Journals, vol. 11(4), pages 231-236.
    4. Paul Welfens, 2012. "Marshall-Lerner condition and economic globalization," International Economics and Economic Policy, Springer, vol. 9(2), pages 191-207, June.
    5. Reinhart, Carmen, 1995. "Devaluation, Relative Prices, and International Trade: Evidence from Developing Countries," MPRA Paper 6974, University Library of Munich, Germany.
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    7. Gordon D. Menzies, 2005. "Who'S Afraid Of The Marshall-Lerner Condition?," Economic Papers, The Economic Society of Australia, vol. 24(4), pages 309-315, December.
    8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    9. Yu Hsing, 2010. "Test of the Marshall-Lerner Condition for Eight Selected Asian Countries and Policy Implications," Global Economic Review, Taylor & Francis Journals, vol. 39(1), pages 91-98.
    10. Christian Pierdzioch, 2005. "Capital Mobility, Consumption Substitutability and the Effects of Monetary Policy in Open Economies," German Economic Review, Verein für Socialpolitik, vol. 6(1), pages 79-94, 02.
    11. Mohsen Bahmani-Oskooee, 1998. "Cointegration Approach to Estimate the Long-Run Trade Elasticities in LDCs," International Economic Journal, Taylor & Francis Journals, vol. 12(3), pages 89-96.
    12. Paul Krugman, 1995. "Growing World Trade: Causes and Consequences," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 327-377.
    13. Peter Wilson, 2001. "Exchange Rates and the Trade Balance for Dynamic Asian Economies—Does the J-Curve Exist for Singapore, Malaysia, and Korea?," Open Economies Review, Springer, vol. 12(4), pages 389-413, October.
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