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The Marshall-Lerner condition at commodity level: Evidence from Korean-U.S. trade

Mohsen Bahmani-Oskooee () and Jungho Baek

Economics Bulletin, 2015, vol. 35, issue 2, 1136-1147

Abstract: The Marshall-Lerner condition asserts that a devaluation or depreciation will improve the trade balance if sum of price elasticities of import and export demand exceeds unity. Almost all previous studies estimated the condition using aggregate trade data. A new group is now emerging which uses data at commodity level to reduce aggregation bias. We add to this latter group by estimating the Marshall-Lerner condition using commodity prices from 10 single digit industries that trade between Korea and the U.S. We find support for the Marshall-Lerner condition in four industries. These four industries engage in almost 65% of the trade between the two countries.

Keywords: The Marshall-Lerner Condition; Korea; the U.S.; Commodity Trade; Bounds Testing. (search for similar items in EconPapers)
JEL-codes: F3 F0 (search for similar items in EconPapers)
Date: 2015-05-14
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