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Exchange rate policy and trade balance : a cointegration analysis of the Argentine experience since 1962

[journal article]

Fugarolas Alvarez-Ude, Guadalupe; Matesanz Gómez, David

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Abstract Using multivariate cointegration tests for non-stationary data and vector error correction models, this paper examines the determinants of trade balance for Argentina over the last forty to fifty years taking into account that the short-run impacts of currency depreciation on the trade balance behaviour may differ from the long-run effects. Our investigation confirms the existence of long-run relationships among trade balance, real exchange rate and foreign and domestic incomes for Argentina during different real exchange rate 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 real exchange rate on the trade balance not finding support for a J-curve pattern in the short-run.
Keywords Argentina; rate of exchange; economic policy; trade balance; purchasing power
Classification Political Economy; Economic Statistics, Econometrics, Business Informatics
Free Keywords Argentina; Marshall-Lerner; J-Curve; cointegration and impulse response analysis
Document language English
Publication Year 2009
Page/Pages p. 2571-2582
Journal Applied Economics, 41 (2009) 20
DOI http://dx.doi.org/10.1080/00036840701222660
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)