Cointegration Approach to Estimate the Long-Run Trade Elasticities in LDCs

Mohsen Bahmani-Oskooee

International Economic Journal, 1998, vol. 12, issue 3, 89-96

Abstract: The Marshall-Lerner condition postulates that if the sum of import and export demand elasticities add up to more than one, devaluation should improve the trade balance in the long-run. This paper is the first to employ a long-run method, i.e., cointegration technique to estimate trade elasticities in less develop countries. In most cases the results reveal that indeed trade elasticities are large enough to support devaluation as a successful policy to improve the trade balance. [F10, F31]

Date: 1998
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DOI: 10.1080/10168739800000031

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