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The effects of macroeconomic stability on foreign trade. An analysis for Spain, 1986-2000

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  • Ana Belen Gracia Andia
  • Maria Dolores Gadea Rivas
  • Jose Maria Serrano Sanz

Abstract

Two main factors underlie the rebirth of interest in the study of the influence of the real exchange rate on trade, the reduction of its volatility and the current trend towards price stability. The objective of this study is to analyse the effects of the process of nominal convergence, required of the European member states for the fulfilment of monetary integration, on foreign trade flows. The case of Spain, which is especially interesting in this context, is studied for the period 1986 to 2000. The results of estimating the aggregate functions of the export and import of goods shows how macroeconomic stability has altered the behaviour of trade with respect to the two basic determinants - income and prices - how it has caused a significant structural change in the real exchange rate and, finally, how it has laid the explanatory bases for transactions in the twenty-first century with the single currency - the euro.

Suggested Citation

  • Ana Belen Gracia Andia & Maria Dolores Gadea Rivas & Jose Maria Serrano Sanz, 2006. "The effects of macroeconomic stability on foreign trade. An analysis for Spain, 1986-2000," Applied Economics, Taylor & Francis Journals, vol. 38(17), pages 2021-2036.
    • Handle: RePEc:taf:applec:v:38:y:2006:i:17:p:2021-2036
    DOI: 10.1080/00036840500427395
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    1. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, vol. 80(2), pages 355-385, October.
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    Cited by:

    1. Gadea, Maria Dolores & Gracia, Ana Belen, 2009. "European monetary integration and persistance of real exchange rates," Finance Research Letters, Elsevier, vol. 6(4), pages 242-249, December.

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