Exchange rate policy and trade balance: a cointegration analysis of the Argentine experience since 1962 |
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| Authors: | David Matesanz Guadalupe Fugarolas |
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| Institution: | 1. Applied Economic Department , University of Oviedo , Spain matesanzdavid@uniovi.es;3. University of Santiago de Compostela , Game-Idega and Caixa Galicia |
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| Abstract: | Using multivariate cointegration tests for nonstationary data and vector error correction models, this article examines the determinants of trade balance (TB) for Argentina over the last forty to fifty years taking into account that the short-run impacts of currency depreciation on the TB behaviour may differ from the long-run effects. Our investigation confirms the existence of long-run relationships among TB, real exchange rate (RER) and foreign and domestic incomes for Argentina during different RER management policies. Based on the estimations, the Marshall-Lerner condition is checked and, by means of impulse response functions, we trace the effect of a one-time shock to the RER on the TB not finding support for a J-curve pattern in the short-run. |
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