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Exchange rate policy and trade balance. A cointegration analysis of the argentine experience since 1962

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  • Matesanz Gómez, David
  • Fugarolas Álvarez-Ude, Guadalupe

Abstract

Using multivariate cointegration tests for non-stationary data and vector error correction models, this paper examines the determinants of trade balance for Argentina over the last forty to fifty years. Our investigation confirms the existence of long-run relationships among trade balance, Real Exchange Rate (RER) and foreign and domestic incomes for Argentina during different real exchange rate management policies. Based on the estimations, the Marshall-Lerner condition is examined and, by means of impulse response functions, we trace the effect of a one-time shock to the RER on the trade balance checking the J-curve pattern.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 151.

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Date of creation: 2006
Date of revision: 2006
Handle: RePEc:pra:mprapa:151

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Keywords: Argentina; Marshall-Lerner; J-Curve; cointegration and impulse response analysis;

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  1. 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, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  2. Christine Richaud & AristomEne Varoudakis & Marie-Ange VEganzonEs, 2003. "Real exchange rate and openness in emerging economies: Argentina in the long run," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 35(3), pages 293-303.
  3. Paresh Kumar Narayan, 2004. "New Zealand's trade balance: evidence of the J-curve and granger causality," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 11(6), pages 351-354.
  4. Syed Mahmud & M. Eray Yucel, 2001. "Testing Marshall-Lerner Condition : A Non-Parametric Approach," Departmental Working Papers, Bilkent University, Department of Economics 0102, Bilkent University, Department of Economics.
  5. 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, Taylor & Francis Journals, vol. 17(1), pages 1-22.
  6. Rose, Andrew K., 1990. "Exchange rates and the trade balance : Some evidence from developing countries," Economics Letters, Elsevier, Elsevier, vol. 34(3), pages 271-275, November.
  7. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
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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 48084, University Library of Munich, Germany, revised 04 Jul 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, 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, Elsevier, vol. 29(3), pages 879-883.

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