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J-Curve Dynamics and the Marshall-Lerner Condition: Evidence from Azerbaijan

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  • Jamilov, Rustam
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    Abstract

    This paper seeks empirical evidence for the J-curve and the Marshal-Lerner condition for Azerbaijan. The results suggest that a real depreciation of the Azerbaijani Manat would cause a decline in the balance of trade in the short-run and an increase in the long-run. When including the prices of exports and imports into the analysis, the robustness test shows that the terms of trade ratio diminishes following the devaluation and does not return to its pre-depreciation level in the long-run, while the balance of trade continues to improve. This points at the presence of an underlying volume effect as the key driver of the trade balance growth. Overall, the results of this study suggest a fulfillment of the Marshall-Lerner condition criteria, indicate the existence of the J-curve, and the price and volume effects.

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    File URL: http://mpra.ub.uni-muenchen.de/39272/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36799.

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    Date of creation: Nov 2011
    Date of revision: Feb 2012
    Handle: RePEc:pra:mprapa:36799

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    Keywords: Marshall-Lerner condition; Azerbaijan; J-curve; real depreciation; Manat; export and import price;

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    References

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    1. repec:ebl:ecbull:v:5:y:2003:i:18:p:1-13 is not listed on IDEAS
    2. Mohsen Bahmani-Oskooee & Charikleia Economidou & Gour Goswami, 2006. "Bilateral J-curve between the UK vis-a-vis her major trading partners," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 38(8), pages 879-888.
    3. repec:ebl:ecbull:v:6:y:2005:i:10:p:1-17 is not listed on IDEAS
    4. Mohsen Bahmani-Oskooee & Janardhanan Alse, 1994. "Short-Run versus Long-Run Effects of Devaluation: Error-Correction Modeling and Cointegration," Eastern Economic Journal, Eastern Economic Association, vol. 20(4), pages 453-464, Fall.
    5. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    6. Gupta-Kapoor Anju & Ramakrishnan Uma, 1999. "Is There A J-Curve? A New Estimation for Japan," International Economic Journal, Taylor & Francis Journals, Taylor & Francis Journals, vol. 13(4), pages 71-79.
    7. Rose, Andrew K. & Yellen, Janet L., 1989. "Is there a J-curve?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 24(1), pages 53-68, July.
    8. Guilherme Moura & Sergio Da Silva, 2005. "Is There a Brazilian J-Curve?," International Finance, EconWPA 0505001, EconWPA.
    9. R. Scott Hacker & Abdulnasser Hatemi-J, 2004. "The effect of exchange rate changes on trade balances in the short and long run," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(4), pages 777-799, December.
    10. Mohsen Bahmani-Oskooee & Artatrana Ratha, 2007. "The S-curve Dynamics of US Bilateral Trade," Review of International Economics, Wiley Blackwell, vol. 15(2), pages 430-439, 05.
    11. Krueger,Anne O., 1983. "Exchange-Rate Determination," Cambridge Books, Cambridge University Press, number 9780521273015, 9.
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    Cited by:
    1. Jamilov, Rustam, 2012. "Is There a J-curve for Azerbaijan? Evidence from Industry-Level Analysis," MPRA Paper 39370, University Library of Munich, Germany.
    2. Jamilov, Rustam, 2012. "Channels of Monetary Transmission in the CIS," MPRA Paper 39568, University Library of Munich, Germany.
    3. Mohsen Bahmani-Oskooee & Rustam Jamilov, 2014. "Export diversification and the S-curve effect in a resource-rich state: evidence from Azerbaijan," Economic Change and Restructuring, Springer, vol. 47(2), pages 135-154, May.

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