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Short-Run versus Long-Run Effects of Devaluation: Error-Correction Modeling and Cointegration

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Author Info

  • Mohsen Bahmani-Oskooee

    (University of Wisconsin, Milwaukee)

  • Janardhanan Alse

    (Indiana University, Southeast)

Abstract

After identifying shortcomings associated with most previous studies on the relation between the trade balance and the exchange rate, we reexamine the statistical relation between these two variables by employing the cointegration and error-correction modeling techniques. For most countries considered, we do not find evidence of a long-run relation between the trade balance and the exchange rate. Results from error-correction modeling provide some support for the short-run relation and the J-Curve phenomenon.

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File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume20/V20N4P453_464.pdf
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Bibliographic Info

Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 20 (1994)
Issue (Month): 4 (Fall)
Pages: 453-464

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Handle: RePEc:eej:eeconj:v:20:y:1994:i:4:p:453-464

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Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
Phone: (201) 684-7346
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Web page: http://www.ramapo.edu/eea/journal.html
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Keywords: Devaluation; Exchange Rates;

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