Currency devaluation and trade balance: Evidence from the US services trade
Ka Ming Cheng ()
Journal of Policy Modeling, 2020, vol. 42, issue 1, 20-37
This study aims to revisit the effectiveness of using currency devaluation as a policy tool to improve trade balance by estimating the exchange rate elasticities of services trade between the US and rest of the world with quarterly disaggregated services trade data from 1999 to 2015. Empirical results reveal that the impacts of currency devaluation on individual services trade are mixed and largely depend on the nature of services. Using currency devaluation to raise export services trade and reduce import services trade seems to be more effective in the long-run but not in the short-run. It is interesting to note that some individual services trades are insensitive to exchange rate changes. The estimates also reveal that most categories of services trade are income elastic and economic growth plays a key role in determining the imports and exports of services trade.
Keywords: Services trade; Exchange rate elasticity; Income elasticity; Autoregressive distribution lag model (search for similar items in EconPapers)
JEL-codes: C22 F14 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:42:y:2020:i:1:p:20-37
Access Statistics for this article
Journal of Policy Modeling is currently edited by A. M. Costa
More articles in Journal of Policy Modeling from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().