Trade Balance and Exchange-Rate for a Small Open Economy during the EMS: The Hellenic Case 1983:1-1995:12
AbstractWe are interested on assessing the effectiveness of the Bank of Greece (BoG) exchange rate policy, to achieve the objective of adjusting balance of payments des-equilibrium, during the period 1983:1-1995:12. The traditional theory of the balance of payments adjustment process through exchange rate changes is used for this purpose. We found evidence, first, about the doubtful effectiveness of this policy due to the marginal verification of the critical elasticities condition; second, about the success of the exchange rate policy in the short-run, since the monthly data of bilateral exchange rates (USD, DEM, ITL, FRF, GBP, JPY) of the Hellenic Drachma (GRD) Granger cause the respective trade balances; third, about the significant co-movement in the series which in the long-run, are driven by the same stochastic trend. We are much aware of the tentative nature of these conclusions. However, our findings suggest that the loss of the exchange rate policy was costly in the case of Hellas because an efficient policy sacrificed by the BoG to the European Central Bank (ECB).
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Bibliographic InfoPaper provided by EconWPA in its series International Finance with number 0505012.
Length: 19 pages
Date of creation: 20 May 2005
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Note: Type of Document - pdf; pages: 19. The paper is published from the 'European Research Studies Journal' (EconLit indexed) in 2001, vol.IV, Iss. (3-4), pp.121-139.
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Optimum Currency Area; EMS; EMU; Traditional Adjustment Process for Merchandise Payments; Granger Causality; Integration and Co- integration Analysis;
Find related papers by JEL classification:
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-05-23 (All new papers)
- NEP-IFN-2005-05-23 (International Finance)
- NEP-MAC-2005-05-23 (Macroeconomics)
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