The Marshall-Lerner Condition in the Fragile Five Economies: Evidence from the ARDL Bounds Test Approach

Ayrton J. C. Amaral and Marthinus Breitenbach
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Ayrton J. C. Amaral: University of Pretoria

Business and Economics Research Journal, 2021, vol. 12, issue 4, 731-750

Abstract: This paper evaluates the Marshall-Lerner condition in the fragile five economies of Brazil, India, Indonesia, South Africa, and Turkey and, in the process, offers an indication of whether the evaluation of this condition is subject to the limitations that have previously been identified in the literature. This research is novel as it studies a set of countries known as the fragile five, often overlooked in the literature. The ARDL Bounds methodology is used to estimate separate export and import demand equations. Results of the study show little evidence supporting the validity of the Marshall-Lerner condition in these five countries. All the models, except for those relating to Turkey, show signs of underlying issues such as model misspecification. The results imply that future empirical work on the Marshall-Lerner condition, particularly work centred on the fragile five, would likely need to address these underlying empirical issues in order to produce more consistent results.

Keywords: Marshall-Lerner Condition; Fragile Five; ARDL Bounds Test; Trade Elasticities; Emerging Markets (search for similar items in EconPapers)
JEL-codes: C22 C50 F32 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:buecrj:0569

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