Exchange rates and the trade balance in Argentina and Peru: is there a J-curve?
| Main Author: | |
|---|---|
| Language: | English |
| Published: |
Oberlin College Honors Theses / OhioLINK
1995
|
| Subjects: | |
| Online Access: | http://rave.ohiolink.edu/etdc/view?acc_num=oberlin1342192000 |
| id |
ndltd-OhioLink-oai-etd.ohiolink.edu-oberlin1342192000 |
|---|---|
| record_format |
oai_dc |
| spelling |
ndltd-OhioLink-oai-etd.ohiolink.edu-oberlin13421920002021-08-03T05:42:32Z Exchange rates and the trade balance in Argentina and Peru: is there a J-curve? Trost, Steven C. Economic History Economics Economic Theory Latin American History Latin American Studies J-curve Latin American economy depretiation Peru Argentina In this paper, I test whether quarterly data either supports or disproves the existence ofsuch a J-curve in two Latin American countries -- Argentina and Peru. The time periods studiedwill be: for Peru, 1979 quarter 1 to 1991 quarter 2 and for Argentina, 1977 quarter 1 to 1990quarter 4. Before completing the empirical part of this paper, I expected to find, if any, only a short deterioration in the trade balance following a depretiation of the real exchange rate in thesetwo countries. With prices as well as other economic indicators changing daily, the reaction timesof economic actors who deal with Latin America, whether from the inside or the outside, havegrown ever shorter. Many contracts are short-term or are indexed so the real terms of thecontract will not change as the nominal indicators do. Short reaction times should mean that theimport/export market will adjust quickly to any change in the real exchange rate or otherindicators. Contracts will be renegotiated quickly because of their short-term nature. This quickadjustment is not only important for the first possible cause of a J-curve, namely stickiness causedby contracts outstanding, but could also lead to a prediction about the second factor involved,that of trade elasticities. Quick renegotiations of contracts as well as a general attitude amongactors that are expectant of quick changes would seem to favor a high elasticity of demand. Forexample if a foreign importer suddenly sees the price of imports from Peru go down, she may bemore anxious to take advantage of this fall in price than if the imports were from a more stableeconomy. Since in the Peruvian economy, things are likely to change quickly, the foreignimporter will want to take advantage of the low prices before they are eradicated by, for example,a sudden rise in inflation in Peru. Because of this expectedly short duration of a J-curve, shouldone exist, I define a significant J-curve as anything longer than two quarters. In other words, ifthe trade balance does not start to improve before the second lagged quarter after the depretiation(after the quarter of the depretiation and the first lagged quarter), a J-curve exists. Anydeterioration shorter than two quarters can be interpreted only as the result of the impossibility ofinstantaneous reactions on the part of the actors. While this may be a brief J-curve by anystandards, I think this definition is appropriate for a study of Latin American countries. 1995 English text Oberlin College Honors Theses / OhioLINK http://rave.ohiolink.edu/etdc/view?acc_num=oberlin1342192000 http://rave.ohiolink.edu/etdc/view?acc_num=oberlin1342192000 unrestricted This thesis or dissertation is protected by copyright: all rights reserved. It may not be copied or redistributed beyond the terms of applicable copyright laws. |
| collection |
NDLTD |
| language |
English |
| sources |
NDLTD |
| topic |
Economic History Economics Economic Theory Latin American History Latin American Studies J-curve Latin American economy depretiation Peru Argentina |
| spellingShingle |
Economic History Economics Economic Theory Latin American History Latin American Studies J-curve Latin American economy depretiation Peru Argentina Trost, Steven C. Exchange rates and the trade balance in Argentina and Peru: is there a J-curve? |
| author |
Trost, Steven C. |
| author_facet |
Trost, Steven C. |
| author_sort |
Trost, Steven C. |
| title |
Exchange rates and the trade balance in Argentina and Peru: is there a J-curve? |
| title_short |
Exchange rates and the trade balance in Argentina and Peru: is there a J-curve? |
| title_full |
Exchange rates and the trade balance in Argentina and Peru: is there a J-curve? |
| title_fullStr |
Exchange rates and the trade balance in Argentina and Peru: is there a J-curve? |
| title_full_unstemmed |
Exchange rates and the trade balance in Argentina and Peru: is there a J-curve? |
| title_sort |
exchange rates and the trade balance in argentina and peru: is there a j-curve? |
| publisher |
Oberlin College Honors Theses / OhioLINK |
| publishDate |
1995 |
| url |
http://rave.ohiolink.edu/etdc/view?acc_num=oberlin1342192000 |
| work_keys_str_mv |
AT troststevenc exchangeratesandthetradebalanceinargentinaandperuisthereajcurve |
| _version_ |
1719423947261345792 |