The J-Curve Effect on the Trade Balance in Armenia
International Journal of Economics, Finance and Management Sciences
Volume 3, Issue 3, June 2015, Pages: 270-278
Received: Apr. 27, 2015; Accepted: May 11, 2015; Published: May 23, 2015
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Gevorg Grigoryan, Shanghai University of Finance & Economics, School of Finance, Shanghai, China
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Over the past years the Armenian Dram has appreciated against their major trading partners’ currencies. Such appreciation has received mixed reactions. Some economists argue that the depreciation of currencies is a good stimulant for export growth, while others argue that the net benefits of depreciation cannot outweigh its ills on the economy. The purpose of this paper is to investigate the effects of depreciation on the trade balance of Armenia using vector error correction model (VECM) and to trace the response of the trade balance to the shocks in the exchange rate using Impulse response function. This study finds evidence of the J-curve on the Armenian trade balance and the existence of a long-run equilibrium relationship among the variables. This suggests that following a real depreciation the trade balance will initially deteriorate, but will improve in the long run.
Armenia, J-Curve, Exchange Rate, Trade Balance, VECM
To cite this article
Gevorg Grigoryan, The J-Curve Effect on the Trade Balance in Armenia, International Journal of Economics, Finance and Management Sciences. Vol. 3, No. 3, 2015, pp. 270-278. doi: 10.11648/j.ijefm.20150303.23
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