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COINTEGRATlON TEST OF A LONG-RUN RELATION BETWEEN THE REAL EFFECTIVE EXCHANGE RATE AND THE TRADE BALANCE

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Author Info
AUGUSTINE C. ARIZE
Abstract

This paper uses newly developed cointegration methodologies to examine the long-run relation between the real effective exchange rate and the trade balance in nine Asian economies over the present flexible exchange rate period. 1973Q1 through 1991Q1. The results indicate that there exists a positive and significant long-run "statistical equilibrium” between the trade balance and the real effective exchange rate in Asia. The approach adopted in this study is found to be an acceptable substitute for testing the Marshall-Lerner condition of stability. [F31, F14]

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Article provided by Korean International Economic Association in its journal International Economic Journal.

Volume (Year): 8 (1994)
Issue (Month): 3 (October)
Pages: 1-9
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Handle: RePEc:taf:intecj:v:8:y:1994:i:3:p:1-9

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  1. Bahmani-Oskooee, Mohsen, 1991. "Is there a long-run relation between the trade balance and the real effective exchange rate of LDCs?," Economics Letters, Elsevier, vol. 36(4), pages 403-407, August. [Downloadable!] (restricted)
  2. James MacKinnon, 1990. "Critical Values for Cointegration Tests," University of California at San Diego, Economics Working Paper Series 90-4, Department of Economics, UC San Diego. [Downloadable!]
  3. Phillips, P.C.B., 1986. "Understanding spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 33(3), pages 311-340, December. [Downloadable!] (restricted)
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  4. Hall, S G, 1986. "An Application of the Granger & Engle Two-Step Estimation Procedure to United Kingdom Aggregate Wage Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 229-39, August.
  5. Kremers, Jeroen J M & Ericsson, Neil R & Dolado, Juan J, 1992. "The Power of Cointegration Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 325-48, August.
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  6. Hsiao, Cheng, 1981. "Autoregressive modelling and money-income causality detection," Journal of Monetary Economics, Elsevier, vol. 7(1), pages 85-106. [Downloadable!] (restricted)
  7. Bahmani-Oskooee, Mohsen, 1985. "Devaluation and the J-Curve: Some Evidence from LDCs," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 500-504, August. [Downloadable!] (restricted)
  8. Augustine Arize, 1991. "Specification Tests Of The Aggregate Import Demand Model In Developing Countries," International Economic Journal, Korean International Economic Association, vol. 5(1), pages 79-89, April. [Downloadable!] (restricted)
  9. Perron, Pierre, 1988. "Trends and random walks in macroeconomic time series : Further evidence from a new approach," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 297-332. [Downloadable!] (restricted)
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  10. Sargan, John Denis & Bhargava, Alok, 1983. "Testing Residuals from Least Squares Regression for Being Generated by the Gaussian Random Walk," Econometrica, Econometric Society, vol. 51(1), pages 153-74, January. [Downloadable!] (restricted)
  11. Muscatelli, Vito Antonio & Papi, Luca, 1990. "Cointegration, Financial Innovation and Modelling the Demand for Money in Italy," The Manchester School of Economic & Social Studies, Blackwell Publishing, vol. 58(3), pages 242-59, September.
  12. Houthakker, Hendrik S & Magee, Stephen P, 1969. "Income and Price Elasticities in World Trade," The Review of Economics and Statistics, MIT Press, vol. 51(2), pages 111-25, May. [Downloadable!] (restricted)
  13. Arize, Augustine, 1987. "The Supply and Demand for Imports and Exports in a Simultaneous Model," Applied Economics, Taylor and Francis Journals, vol. 19(9), pages 1233-47, September.
  14. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
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