Peso depreciation: impact on trade balance
Date
2001-03
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Abstract
This study attempts to determine the effect and measure the impact of depreciation on the trade balance. The effects on the trade balance of the monetary policy variable, government consumption, private consumption and growth rate as compared to the rest of the world are also taken into account. Government consumption and growth rate differential are insignificant in explaining the level of the trade balance. Private consumption decreases the trade balance more than any variable in the model. The monetary variable measured by the level of high-powered money and depreciation are empirically tested to have a positive effect on the trade balance. The positive relation of depreciation on the trade balance is minimal.
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Keywords
Peso depreciation, Trade balance, Financial market, Financial industry, Exchange rate