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Trade Balance and the Real Exchange Rate

Author

Listed:
  • Suranjali Tandon
Abstract
Literature on international trade has been inconclusive on the matter of exchange rate and its impact on trade. The article finds that for a panel of regions, during the period 1980–2010, the imports in all countries respond to changes in real exchange rate, as predicted in theory. Exports on the other hand exhibit value and volume adjustments. A similar analysis of the bilateral trade shows exchange rate matters for only a few countries, to the extent that they lead to adjustments in exports. These results provide the basis for further analysis of the causes underlying such mechanisms and availability of the possibility of using exchange rate as an instrument to correct imbalances in the external account.

Suggested Citation

  • Suranjali Tandon, 2014. "Trade Balance and the Real Exchange Rate," Foreign Trade Review, , vol. 49(2), pages 117-139, May.
    • Handle: RePEc:sae:fortra:v:49:y:2014:i:2:p:117-139
    DOI: 10.1177/0015732514525222
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    References listed on IDEAS

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    Cited by:

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    4. Papahristodoulou, Christos, 2019. "Is there any theory that explains the SEK?," MPRA Paper 95072, University Library of Munich, Germany, revised 08 Jul 2019.
    5. Semih Karacan & Özge Korkmaz, 2022. "Turkish Exports Before and After the 2001 Financial Crisis: A Panel Gravity Model," Foreign Trade Review, , vol. 57(1), pages 27-40, February.
    6. Ernesto R. Gantman & Marcelo P. Dabós, 2018. "Does trade openness influence the real effective exchange rate? New evidence from panel time-series," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 9(1), pages 91-113, March.
    7. Works, Richard Floyd, 2016. "Econometric modeling of exchange rate determinants by market classification: An empirical analysis of Japan and South Korea using the sticky-price monetary theory," MPRA Paper 76382, University Library of Munich, Germany.
    8. Abubakar Lawan Ngoma & Normaz Wana Ismail & Zulkornain Yusop, 2016. "An Analysis of Real Oil Prices and Real Exchange Rates in Five African Countries," Foreign Trade Review, , vol. 51(2), pages 162-179, May.

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    More about this item

    Keywords

    Real exchange rate; trade balance; GDP; panel regression; bilateral trade;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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