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The trade balance and the real exchange rate: the US evidence from 1973: 3 to 1994: 9

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  • Chi-Ang Lin

Abstract

Based upon the trade balance determination models developed by Razin (1984), Greenwood (1984), and Hill (1990), there exists bidirectional causality between the trade balance and the real exchange rate. By applying Geweke's linear feedback measures for the US from 1973:3 to 1994:9, the results indicate that the magnitude of feedback from the real exchange rate to the trade balance is very close to that from the reverse direction and confirm that causality between them is indeed bidirectional.

Suggested Citation

  • Chi-Ang Lin, 1997. "The trade balance and the real exchange rate: the US evidence from 1973: 3 to 1994: 9," Applied Economics Letters, Taylor & Francis Journals, vol. 4(8), pages 517-520.
    • Handle: RePEc:taf:apeclt:v:4:y:1997:i:8:p:517-520
    DOI: 10.1080/758536637
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    References listed on IDEAS

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    1. Mahdavi, Saeid & Sohrabian, Ahmad, 1993. "The exchange value of the dollar and the U.S. trade balance: An empirical investigation based on cointegradon and Granger causality tests," The Quarterly Review of Economics and Finance, Elsevier, vol. 33(4), pages 343-358.
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    1. Ghassan, Hassan B., 2007. "La condition de Marshall-Lerner-Robinson est-elle stable ? Approche par le test GLS cointégration à niveau et puissance améliorés [Does the Marshall-Lerner-Robinson condition verify the stability? ," MPRA Paper 56354, University Library of Munich, Germany, revised 15 Jan 2008.

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