EconPapers    
Economics at your fingertips  
 

Does a real devaluation improve the balance of trade?: empirics from Bangladesh economy

Nusrate Aziz

Journal of Developing Areas, 2012, vol. 46, issue 2, 19-41

Abstract: Similar to many other developing countries Bangladesh, which is the country of my concern, has been pursuing an active exchange rate policy basically to maintain a viable external account position, and competitiveness of its products in world market. The purpose of the study is, therefore, to estimate the impact of real devaluation on country's trade balance. The study constructs nominal and real effective exchange rates which are not readily available for the country. Using multivariate cointegration tests for non-stationary data, the error correction model, and impulse response functions the paper examines the impact of exchange rate policy in both short-and long-run. The estimated results demonstrate that real exchange rate has a significant positive impact on trade balance in the long-run. Thus, currency devaluation has been a significant stimulus for country's exports growth and improvement in current account position. However, the J-curve hypothesis can be explained as the appropriate phenomenon to improve its trade balance in response to exchange rate devaluation.

Keywords: Real Effective exchange rate; J-curve; Cointegration; ECM; Impulse response (search for similar items in EconPapers)
JEL-codes: C22 F31 F32 (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://muse.jhu.edu/journals/journal_of_developing_areas/v046/46.2.aziz.html

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:jda:journl:vol.46:year:2012:issue2:pp:19-41

Access Statistics for this article

More articles in Journal of Developing Areas from Tennessee State University, College of Business Contact information at EDIRC.
Bibliographic data for series maintained by Abu N.M. Wahid ().

 
Page updated 2022-06-17
Handle: RePEc:jda:journl:vol.46:year:2012:issue2:pp:19-41