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Author/Editor:
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Stucka, Tihomir
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Publication Date:
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April 01, 2004
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Electronic Access:
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Free Full text
(PDF file size is 373KB).
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.
The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
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Summary:
A reduced-form model approach was used to estimate the trade balance response to permanent domestic currency depreciation. For this purpose, long-run and short-run effects were estimated, using three modeling methods along with two real effective exchange rate measures. On average, a 1 percent permanent depreciation improves the equilibrium trade balance by between 0.94 percent and 1.3 percent. The new equilibrium is established after approximately 2.5 years. Evidence of the J-curve is also found. Overall, in the light of the results obtained, it is questionable whether permanent depreciation is desirable to improve the trade balance, taking into account potential adverse effects on the rest of the economy.
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Order a print copy
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Series:
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Working Paper No. 04/65
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Subject(s):
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Balance of trade | Croatia | Exchange rate depreciation | Exchange rate adjustments | Transition economies | Trade models | Economic models
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Author's Keyword(s):
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J-Curve | trade balance | transitional economies |
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English
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Publication Date:
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April 01, 2004
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ISBN/ISSN:
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1934-7073
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Format:
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Paper
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Stock No:
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WPIEA0652004
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Pages:
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29
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Price:
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US$15.00 )
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Please address any questions about this title to
publications@imf.org
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