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The Marshall-Lerner Condition in the Fragile Five Economies: Evidence from the ARDL Bounds Test Approach

Author

Listed:
  • Amaral, Ayrton J. C.

    (University of Pretoria)

  • Breitenbach, Marthinus C.

    (University of Pretoria)

Abstract

This paper evaluates the Marshall-Lerner condition in the fragile five economies of Brazil, India, Indonesia, South Africa, and Turkey and, in the process, offers an indication of whether the evaluation of this condition is subject to the limitations that have previously been identified in the literature. This research is novel as it studies a set of countries known as the fragile five, often overlooked in the literature. The ARDL Bounds methodology is used to estimate separate export and import demand equations. Results of the study show little evidence supporting the validity of the Marshall-Lerner condition in these five countries. All the models, except for those relating to Turkey, show signs of underlying issues such as model misspecification. The results imply that future empirical work on the Marshall-Lerner condition, particularly work centred on the fragile five, would likely need to address these underlying empirical issues in order to produce more consistent results.

Suggested Citation

  • Amaral, Ayrton J. C. & Breitenbach, Marthinus C., 2021. "The Marshall-Lerner Condition in the Fragile Five Economies: Evidence from the ARDL Bounds Test Approach," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 12(4), pages 731-750, October.
    • Handle: RePEc:ris:buecrj:0569
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    More about this item

    Keywords

    Marshall-Lerner Condition; Fragile Five; ARDL Bounds Test; Trade Elasticities; Emerging Markets;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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