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Exchange rate policy and trade balance: a cointegration analysis of the Argentine experience since 1962

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  • David Matesanz
  • Guadalupe Fugarolas

Abstract

Using multivariate cointegration tests for nonstationary data and vector error correction models, this article examines the determinants of trade balance (TB) for Argentina over the last forty to fifty years taking into account that the short-run impacts of currency depreciation on the TB behaviour may differ from the long-run effects. Our investigation confirms the existence of long-run relationships among TB, real exchange rate (RER) and foreign and domestic incomes for Argentina during different RER management policies. Based on the estimations, the Marshall-Lerner condition is checked and, by means of impulse response functions, we trace the effect of a one-time shock to the RER on the TB not finding support for a J-curve pattern in the short-run.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 41 (2009)
Issue (Month): 20 ()
Pages: 2571-2582

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Handle: RePEc:taf:applec:v:41:y:2009:i:20:p:2571-2582

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  1. Christine Richaud & Aristomene Varoudakis & Marie-Ange Veganzones, 2000. "Real exchange rate and openness in emerging economies: Argentina in the long run," Applied Economics, Taylor & Francis Journals, vol. 32(1), pages 1-11.
  2. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
  3. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  4. Syed Mahmud & M. Eray Yucel, 2001. "Testing Marshall-Lerner Condition : A Non-Parametric Approach," Departmental Working Papers 0102, Bilkent University, Department of Economics.
  5. Paresh Kumar Narayan, 2004. "New Zealand's trade balance: evidence of the J-curve and granger causality," Applied Economics Letters, Taylor & Francis Journals, vol. 11(6), pages 351-354.
  6. Jonathan Perraton, 2003. "Balance of Payments Constrained Growth and Developing Countries: An examination of Thirlwall's hypothesis," International Review of Applied Economics, Taylor & Francis Journals, vol. 17(1), pages 1-22.
  7. Rose, Andrew K., 1990. "Exchange rates and the trade balance : Some evidence from developing countries," Economics Letters, Elsevier, vol. 34(3), pages 271-275, November.
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Cited by:
  1. Kyophilavong, Phouphet & Shahbaz, Muhammad & Salah Uddin, Gazi, 2013. "Does J-Curve Phenomenon Exist in Case of Laos? An ARDL Approach," MPRA Paper 49052, University Library of Munich, Germany, revised 12 Aug 2013.
  2. Mohsen Bahmani & Hanafiah Harvey & Scott W. Hegerty, 2013. "Empirical tests of the Marshall-Lerner condition: a literature review," Journal of Economic Studies, Emerald Group Publishing, vol. 40(3), pages 411-443, May.
  3. Sastre, Luis, 2012. "Simultaneity between export and import flows and the Marshall–Lerner condition," Economic Modelling, Elsevier, vol. 29(3), pages 879-883.

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