Can real exchange rate devaluation improve the trade balance? The 1990-1998 Brazilian case

Fábio Gomes and Lourenco Paz

Applied Economics Letters, 2005, vol. 12, issue 9, 525-528

Abstract: The Brazilian Trade Balance deficit in the 1990s was blamed on the adopted crawling-peg exchange rate regime in which the real exchange rate was supposedly appreciated. The purpose in this letter is to assess this relationship by using VEC-M model to check if Marshall-Lerner condition and J-curve phenomenon hold. The results indicate that the Marshall-Lerner condition holds and the J-curve would be present in the aftermath of a real exchange rate devaluation.

Date: 2005
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DOI: 10.1080/13504850500076908

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