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Test of the Marshall-Lerner Condition for Eight Selected Asian Countries and Policy Implications

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  • Yu Hsing

Abstract

Applying a general functional form, the Marshall-Lerner condition of the bilateral trade between the US and Hong Kong, India, Japan, Korea, Malaysia, Pakistan, Singapore, or Thailand is examined. In deriving the real exchange rate, both the relative consumer price index (CPI) and producer price index (PPI) are considered. The results show that the widely used log-log form can be rejected for Singapore and Malaysia using either the relative CPI or PPI and is also inappropriate for India and Pakistan using the relative PPI. The Marshall-Lerner condition holds for India, Korea, Japan and Pakistan, is confirmed for Hong Kong, Singapore and Thailand using the relative CPI, and cannot be confirmed for Malaysia. Thus, in examining the Marshall-Lerner condition or the exchange rate behavior, non-linearity or the appropriateness of the functional form needs to be tested

Suggested Citation

  • Yu Hsing, 2010. "Test of the Marshall-Lerner Condition for Eight Selected Asian Countries and Policy Implications," Global Economic Review, Taylor & Francis Journals, vol. 39(1), pages 91-98.
  • Handle: RePEc:taf:glecrv:v:39:y:2010:i:1:p:91-98
    DOI: 10.1080/12265081003696429
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    Citations

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    Cited by:

    1. Matthew McCartney, 2015. "The Missing Economic Magic: The Failure of Trade Liberalization and Exchange Rate Devaluation in Pakistan, 1980–2012," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 20(Special E), pages 59-86, September.
    2. Dong, Fang, 2017. "Testing the Marshall-Lerner condition between the U.S. and other G7 member countries," The North American Journal of Economics and Finance, Elsevier, vol. 40(C), pages 30-40.
    3. repec:agr:journl:v:xxiv:y:2017:i:2(611):p:171-186 is not listed on IDEAS
    4. Sastre, Luis, 2012. "Simultaneity between export and import flows and the Marshall–Lerner condition," Economic Modelling, Elsevier, vol. 29(3), pages 879-883.

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