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Title: |
The Relationship between the Real Exchange Rate and the Trade Balance:
An Empirical Reassessment |
| Author: |
Shirvani,
Hassan; Wilbratte, Barry |
| Author
Affiliation: |
U St Thomas |
| Source: |
International Economic Journal, Spring 1997, v. 11, no. 1, pp. 39-50 |
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Publication Date: |
Spring 1997 |
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Abstract: |
This paper presents an empirical
reassessment of the relationship between the real exchange rate and the
trade balance, using the multivariate cointegration approach. Based on
bilateral trade between the U.S. and other G7 countries, we find
evidence that the trade balance is unresponsive to the exchange rate in
the very short run but is significantly affected by it within two years.
We also find evidence supporting the empirical validity of the
Marshall-Lerner condition, indicating that devaluations do improve the
trade balance in the long run. |
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