Testing the Marshall-Lerner condition for Romania

Ecaterina Tomoiaga and Monica Ioana POP Silaghi
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Ecaterina Tomoiaga: Babes-Bolyai University, Cluj-Napoca, Romania
Monica Ioana POP Silaghi: Babes-Bolyai University, Cluj-Napoca, Romania

Theoretical and Applied Economics, 2022, vol. XXIX, issue 1(630), Spring, 39-48

Abstract: In this paper, we test if a depreciation of a national currency will lead to an improvement of the trade balance. We chose the bilateral relationship of Romania and its ten main trading partners. This study will fill the gap in the Romanian literature on this topic in two ways. Firstly, by using a larger data set than it is used in previous studies. The data set consists of panel data for the period 1999-2019. Secondly, by applying a Fully Modified Ordinary Least Square model we test the long-run relationship between the real exchange rate and trade balance. Through the analysis carried out, we obtained the result that a depreciation of the RON will lead to an improvement in the Romanian trade balance.

Keywords: Marshall-Lerner panel; national currency depreciation; trade balance; Romania. (search for similar items in EconPapers)
Date: 2022
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