OIL PRICES, EXCHANGE RATES, AND THE TRADE BALANCE: EVIDENCE FROM KAZAKHSTAN AND RUSSIA

Simeon Nanovsky ()
Additional contact information
Simeon Nanovsky: Graduate School of Public Policy, Nazarbayev University, Astana, Kazakhstan

Global Economy Journal (GEJ), 2022, vol. 22, issue 04, 1-20

Abstract: The original objective of this paper is to study the impact of the exchange rate on the trade balance for Kazakhstan and Russia. Baseline empirical results indicate that an exchange rate depreciation actually decreases exports and deteriorates the trade balance for these countries; this is the opposite of the traditional theory of the J-curve and Marshall–Lerner condition. The paper then explores why these major oil exporters do not conform to the theory. It argues that it is the oil price that affects both the exchange rate and the trade balance, thereby masking the true impact of the exchange rate on the trade balance. More formally, the paper augments the traditional theory to take into account the behavior of oil prices in the export and trade balance equations. The augmented theory posits that a decrease in the oil price leads to a real exchange rate depreciation and a decline in exports, thereby creating the positive correlation seen in the baseline results. In accordance with the augmented theory, the regression results suffer from omitted variable bias; when the oil price is taken into account, the results again support the theory.

Keywords: Exchange rate; oil price; trade balance; exports; J-curve; Marshall–Lerner condition (search for similar items in EconPapers)
JEL-codes: F14 F31 F4 F47 Q4 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S2194565923500148
Access to full text is restricted to subscribers

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:wsi:gejxxx:v:22:y:2022:i:04:n:s2194565923500148

Ordering information: This journal article can be ordered from

DOI: 10.1142/S2194565923500148

Access Statistics for this article

Global Economy Journal (GEJ) is currently edited by Joseph Pelzman

More articles in Global Economy Journal (GEJ) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().