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Short-Run versus Long-Run Effects of Devaluation: Error-Correction Modeling and Cointegration

Mohsen Bahmani-Oskooee () and Janardhanan Alse
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Janardhanan Alse: Indiana University, Southeast

Eastern Economic Journal, 1994, vol. 20, issue 4, 453-464

Abstract: After identifying shortcomings associated with most previous studies on the relation between the trade balance and the exchange rate, we reexamine the statistical relation between these two variables by employing the cointegration and error-correction modeling techniques. For most countries considered, we do not find evidence of a long-run relation between the trade balance and the exchange rate. Results from error-correction modeling provide some support for the short-run relation and the J-Curve phenomenon.

Keywords: Devaluation; Exchange Rates (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Date: 1994
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Handle: RePEc:eej:eeconj:v:20:y:1994:i:4:p:453-464