Bilateral Trade Elasticity: B&H versus its seven trade partners

Safet Kurtovic, Blerim Halili and Nehat Maxhuni

MPRA Paper from University Library of Munich, Germany

Abstract: Bilateral trade elasticity is important in the analysis of the international trade flows and their anticipation in the process of establishing macroeconomic policy. Our research is based on bilateral data and the assessment of the influence of currency depreciation on the bilateral trade elasticity of B&H and its seven leading trade partners from Central and Southeast Europe. We applied the ARDL econometric technique in the research. In the short term we investigated the presence of the Marshall-Lerner condition (M-L condition) for Croatia and FYR Macedonia, while in the long term we investigated the presence of the M-L condition for Slovenia. In addition, we investigated, in certain cases, the presence of the J-curve, i.e. long-term impact of currency depreciation on the elasticity of export and import demand function. Finally, based on the application of diagnostic statistics and stability tests, the stability of the coefficient was confirmed in the majority of cases.

Keywords: M-L condition; J-curve; elasticity; exchange rate; trade (search for similar items in EconPapers)
JEL-codes: F14 F31 F32 (search for similar items in EconPapers)
Date: 2016-06-05
New Economics Papers: this item is included in nep-ger and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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