The effect of exchange rate on trade balance /
This paper uses newly developed cointegration methodologies to examine the long run relation between the real exchange rate and trade balance in Asian five leading countries (Japan, Korea, Hong Kong, Taiwan and China). The model is applied to the Japanese yen/US dollar (1973:1-2002:4), Korean Won/US...
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| Format: | Thesis Book |
| Language: | English |
| Published: |
2004.
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| Summary: | This paper uses newly developed cointegration methodologies to examine the long run relation between the real exchange rate and trade balance in Asian five leading countries (Japan, Korea, Hong Kong, Taiwan and China). The model is applied to the Japanese yen/US dollar (1973:1-2002:4), Korean Won/US dollar (1971:1-2002:4), Hong Kong dollar/US dollar (1973:1-2002:4), New Taiwan dollar/US dollar (1983:1-2002:4) and RenMinBi/US dollar (1985:1-2002:4) exchange rates. Our procedure involves modeling of the long run relationship and this is followed by the short run function. Based on the results, we find evidence that the trade balance is unresponsive to the exchange rate in the very short run but are significantly affected by it after few years time. There are some evidences 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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| Physical Description: | 74 leaves ; 30cm. |