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The Exchange Rate and Sri Lanka¡¯s Trade Deficit

Author

Listed:
  • Ananda Weliwita

    (Natural Resource Economics Division, Kyoto University)

  • Hiroshi Tsujii

    (Natural Resource Economics Division, Kyoto University)

Abstract

This paper examines the responsiveness of Sri Lanka¡¯s trade deficit to devaluation during the post 1977 period. The results show that notwithstanding persistent devaluation the trade deficit continued to move in the wrong direction suggesting that exchange rate policy was unable to create a favorable balance of trade position. Individual trade volumes also were not responsive to the changes in real exchange rates. While the increase in Sri Lanka¡¯s imports has a positive correlation with the rise in domestic income the growth in its exports is positively correlated with the rise in incomes in importing countries.

Suggested Citation

  • Ananda Weliwita & Hiroshi Tsujii, 2000. "The Exchange Rate and Sri Lanka¡¯s Trade Deficit," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 25(2), pages 131-153, December.
    • Handle: RePEc:jed:journl:v:25:y:2000:i:2:p:131-153
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    References listed on IDEAS

    as
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