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international trade, trade balance

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Subject-Keyword: international trade trade balance

Type of item: Report

Language: English

Place: Malawi

Time:

Description: The effects of successive currency devaluations, since the 1980s, on Malawi-s trade balance are analysed. The major hypothesis tested is that currency devaluation leads to an improvement in trade balance through changes in the real exchange rate. This hypothesis is not supported by the data for Malawi. Although there is evidence of a lagged adjustment yielding an improvement in the trade balance three years after devaluation, the magnitude of this improvement is insufficient to overcome the initial decline in the trade balance following devaluation. The extent of improvement is not consistent with that implied by the hypothesized J-curve effect. The analysis suggests that a one percent rise in real domestic income results in a 0.90 per reduction in the trade balance. The lack of responsiveness of Malawi-s trade balance to changes in foreign income may be associated with the unmanufactured nature of Malawi-s export commodities and the relatively unfavorable market conditions for these exports in the major importing western countries. Other policy measures than those that have been relied on to date are evidently necessary for the desired improvements in trade balance to be achieved.

Date created: 1993

DOI: doi:10.7939-R3ST7F028

License information: Creative Commons Attribution-Non-Commercial-No Derivatives 3.0 Unported

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Autor: Mataya, Charles S. Veeman, Michele M.

Fuente: https://era.library.ualberta.ca/


Introducción



t RURAL ECONOMY Trade Balance and the JCurve Phenomenon In Malawi Charles S.
Mataya and Michele M.
Veeman Staff Paper 93-03 STAFF PAPER Depart e it q I. tt Trade Balance and the J-Curve Phenomenon in Malawi Charles S.
Mataya and Michele M.
Veeman Staff Paper 93-03 The authors are, respectively, Research Assistant and Professor, Department of Rural Economy, University of Alberta. The purpose of the Rural Economy “Staff Papers” series is to provide a forum to accelerate the presentation of issues, concepts, ideas and professional community.
Staff papers are published without peer review. 1 Trade Balance and the .1-Curve Phenomenon in Malawi Abstract The effects of successive currency devaluations, since the 1980s, on Malawi’s trade balance are analysed.
The major hypothesis tested is that currency devaluation leads to an improvement in trade balance through changes in the real exchange rate.
This hypothesis is not supported by the data for Malawi.
Although there is evidence of a lagged adjustment yielding an improvement in the trade balance three years after devaluation, the magnitude of this improvement is insufficient to overcome the initial decline in the trade balance following devaluation.
The extent of improvement is not consistent with that implied by the hypothesized 3-curve effect.
The analysis suggests that a one percent rise in real domestic income results in a 0.90 per reduction in the trade balance, whereas a one percent increase in real foreign income results in a 0.27 per rise in the trade balance.
The lack of responsiveness of Malawi’s trade balance to changes in foreign income may be associated with the unmanufactured nature of Malawi’s export commodities and the relatively unfavorable market conditions for these exports in the major importing western countries. Other policy measures than those that have been relied on to date are evidently necessary for the desired improvements in trade balance to be achieved. 2 Introduction ...





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