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Devaluation, Relative Prices, and International Trade: Evidence from Developing Countries

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Reinhart, Carmen

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Abstract

Devaluation is an integral part of adjustment in many developing countries, particularly relied upon by countries facing large external imbalances. A devaluation can only reduce trade imbalances if it translates to a real devaluation and if trade flows respond to relative prices in a sig nificant and predictable manner. However, a recent strand in the empirical trade literature has questioned the existence of a stable relationship between trade flows and its traditional determinants. This paper re-examines the relationship between relative prices and imports and exports in a sample of 12 developing countries.

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File URL: http://mpra.ub.uni-muenchen.de/6974/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6974.

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Date of creation: Jun 1995
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Publication status: Published in IMF Staff Papers 2.42(1995): pp. 290-312
Handle: RePEc:pra:mprapa:6974

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Related research
Keywords: devaluation imports exports trade elasticities

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Find related papers by JEL classification:
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
F1 - International Economics - - Trade

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Kamin, S.B., 1988. "Devaluation, External Balance, And Macroeconomic Performance: A Look At The Numbers," Princeton Studies in International Economics 62, International Economics Section, Departement of Economics Princeton University,.
  2. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June. [Downloadable!] (restricted)
  3. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-72, August.
  4. James H. Stock & Mark W. Watson, 1989. "A Simple MLE of Cointegrating Vectors in Higher Order Integrated Systems," NBER Technical Working Papers 0083, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Rittenberg, Libby, 1986. "Export growth performance of less-developed countries," Journal of Development Economics, Elsevier, vol. 24(1), pages 167-177, November. [Downloadable!] (restricted)
  6. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Technical Working Papers 0100, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Banerjee, Anindya, et al, 1986. "Exploring Equilibrium Relationships in Econometrics through Static Models: Some Monte Carlo Evidence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 253-77, August.
  8. Reinhart, Carmen, 1991. "Fiscal Policy, the Real Exchange Rate, and Commodity Prices," MPRA Paper 8197, University Library of Munich, Germany. [Downloadable!]
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  9. Ceglowski, Janet, 1991. "Intertemporal substitution in import demand," Journal of International Money and Finance, Elsevier, vol. 10(1), pages 118-130, March. [Downloadable!] (restricted)
  10. David K. Backus & Patrick J. Kehoe & Finn E. Kydland, 1992. "Relative Price Movements in Dynamic General Equilibrium Models of International Trade," Working Papers 92-25, New York University, Leonard N. Stern School of Business, Department of Economics.
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  11. 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. [Downloadable!] (restricted)
  12. 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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  13. Ogaki, Masao, 1992. "Engel's Law and Cointegration," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 1027-46, October. [Downloadable!] (restricted)
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  14. Marquez, Jaime, 1988. "Cyclical and secular trade elasticities : An application to LDC exports," Journal of Economic Dynamics and Control, Elsevier, vol. 12(1), pages 71-76, March. [Downloadable!] (restricted)
  15. Muscatelli, V. A. & Stevenson, A. A. & Montagna, C., 1994. "Intra-NIE competition in exports of manufactures," Journal of International Economics, Elsevier, vol. 37(1-2), pages 29-47, August. [Downloadable!] (restricted)
  16. Kiguel, Miguel A. & Ghei, Nita, 1993. "Devaluation in low-inflation economies," Policy Research Working Paper Series 1224, The World Bank. [Downloadable!]
  17. 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)
  18. 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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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Angelos Antzoulatos & Simone Peart, 1998. "Import demand under a foreign exchange constraint," Research Paper 9810, Federal Reserve Bank of New York. [Downloadable!]
  2. Shaghil Ahmed, 1999. "Sources of economic fluctuations in Latin America and implications for choice of exchange rate regimes," International Finance Discussion Papers 656, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  3. Martin Uribe & Vivian Yue, 2004. "Country spreads and emerging countries: who drives whom?," Proceedings, Federal Reserve Bank of San Francisco, issue Jun. [Downloadable!]
    Other versions:
  4. Andreas Billmeier & Dalia Hakura, 2008. "Trade Elasticities in the Middle East and Central Asia: What is the Role of Oil?," IMF Working Papers 08/216, International Monetary Fund. [Downloadable!]
  5. David Cook & Michael B. Devereux, 2004. "Dollar bloc or dollar block: external currency pricing and the East Asian crisis," Pacific Basin Working Paper Series 2004-35, Federal Reserve Bank of San Francisco. [Downloadable!]
  6. Mabel Cabezas B. & Jorge Selaive C. & Gonzalo Becerra M., 2004. "Determinants of Non-Mining Exports: A Regional Perspective," Working Papers Central Bank of Chile 296, Central Bank of Chile. [Downloadable!]
  7. Martha Misas & María Teresa Ramírez & Luisa Fernanda Silva, . "Exportaciones no tradicionales en Colombia y sus Determinantes," Borradores de Economia 178, Banco de la Republica de Colombia. [Downloadable!]
    Other versions:
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