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Merchandise Trade Balances of Less Developed Countries and Exchange Rate of the U.S. Dollar: Cases of Iran, Venezuela & Saudi Arabia

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Author Info
Ayoub Yousefi
Abstract

This study examines the effects of changes in the exchange rate of the U.S. dollar on the trade balances of three oil-exporting countries, Iran, Venezuela, and Saudi Arabia. An exchange rate pass-through model is applied to allow changes in the exchange rate of the dollar to affect prices of traded goods. We found that changes in the effective exchange rate of the dollar pass through partially to these countries' import prices. For the export prices, under the floating exchange rate system depreciation of the dollar was found to cause export prices of these countries (except Saudi Arabia) to rise. While changes in the exchange rate of the dollar influence these countries' trade balances, the long-run trade balance adjustments seem to follow different patterns and time profiles.

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Publisher Info
Paper provided by University of Waterloo, Department of Economics in its series Working Papers with number 00002.

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Length: 37 pages
Date of creation: Feb 2000
Date of revision: Feb 2000
Handle: RePEc:wat:wpaper:00002

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Related research
Keywords: Trade Balance; J-curve; Invoicing Currency; Exchange Rate pass-through; Crude Oil.;

Find related papers by JEL classification:
F31 - International Economics - - International Finance - - - Foreign Exchange
F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade

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    Other versions:
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    Other versions:
  8. Fisher, Eric, 1989. "A model of exchange rate pass-through," Journal of International Economics, Elsevier, vol. 26(1-2), pages 119-137, February. [Downloadable!] (restricted)
    Other versions:
  9. Kenen, Peter B & Rodrik, Dani, 1986. "Measuring and Analyzing the Effects of Short-term Volatility in Real Exchange Rates," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 311-15, May. [Downloadable!] (restricted)
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    Other versions:
  30. Catherine L. Mann, 1986. "Prices, profit margins, and exchange rates," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jun, pages 366-379.
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