Preliminary communication

Devaluation and trade balance in Latin American countries

Huseyin Kalyoncu ; Faculty of Economics and Business Administration, Meliksah University, Kaysery, Turkey
Ilhan Ozturk orcid.org/0000-0002-6521-0901 ; Faculty of Economics and Administrative Sciences, Cag University, Yenice, Mersin, Turkey
Seyfettin Artan ; Faculty of Economics and Administrative Sciences, Department of Economics, Karadeniz Technical University, Trabzon, Turkey
Kahraman Kalyoncu ; Faculty of Economics and Business Administration, Aksaray University, Aksaray, Turkey

Abstract

The aim of this paper is to examine effectiveness of devaluation on the trade balance in four countries: Argentina, Brazil, Mexico and Peru. We use the Johansen-Juselius cointegration test and impulse response function to estimate the long-run and shortrun effects of devaluation on the trade balance. The estimated results suggest that depreciation improve the trade balance in the long run for the case of Argentina and Peru, and in the short-run there has been J-curve in Argentina and Peru. In addition, the cointegration is found among the four variables (trade balance, domestic income, foreign incomes and real exchange rate) in the case of Argentina and Peru. The results also indicate that there is no cointegration relationship between these variables for Brazil and Mexico. The conclusion of the paper is that the evidence of the J-curve pattern was found for Argentina and Peru only.

Keywords

Trade balance; J-Curve; Marshal-Lerner condition; cointegration; impulse response analysis; Latin America

Hrčak ID:

38397

URI

https://hrcak.srce.hr/38397

Publication date:

29.6.2009.

Article data in other languages: croatian

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