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| Author: | Rose, A. K. |
| Title: | The role of exchange rates in a popular model of international trade. Does the "Marshall-Lerner" condition hold? |
| Journal: | Journal of International Economics
1991 : MAY, VOL. 30:3-4, p. 301-316 |
| Index terms: | INTERNATIONAL TRADE EXCHANGE RATES ECONOMIC ANALYSIS |
| Language: | eng |
| Abstract: | The empirical relationship between the real effective exchange rate and the aggregate real trade balance is examined for five major OECD countries in the post-Bretton Woods era. A variety of parametric and non-parametric techniques are used. It is shown that the "Bickerdike-Robinson-Metzler" model or the "imperfect substitutes" model, still constitutes the chief tool of applied trade balance analysis. A non-structural trade balance equation has been estimated and the hypothesis that the exchange rate is not a significant determinant of the trade balance has been tested. The data do not seem able to reject the hypothesis that the generalized Marshall-Lerner condition does not hold. Further research may explain this finding. |
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