The Effects of Exchange Rate Change on the Trade Balance in Croatia

WPIEA0652004 Image
Price:  $15.00

Author/Editor: Tihomir Stucka
Release Date: © April, 2004
ISBN : 978-1-45184-871-7
Stock #: WPIEA0652004
Stock Status: On back-order

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A reduced-form model approach was used to estimate the trade balance response to permanent domestic currency depreciation. For this purpose, long-run and short-run effects were estimated, using three modeling methods along with two real effective exchange rate measures. On average, a 1 percent permanent depreciation improves the equilibrium trade balance by between 0.94 percent and 1.3 percent. The new equilibrium is established after approximately 2.5 years. Evidence of the J-curve is also found. Overall, in the light of the results obtained, it is questionable whether permanent depreciation is desirable to improve the trade balance, taking into account potential adverse effects on the rest of the economy.


Balance of trade , International trade

More publications in this series: Working Papers

More publications by: Tihomir Stucka