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The Effects of Real Exchange Rate on Trade Balance in Cote d’Ivoire: Evidence from the Cointegration Analysis and Error-Correction Models

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  • Drama, Bedi Guy Herve

Abstract

This paper investigates the effect of real exchange rate on the balance of trade of Cote d’Ivoire using multivariate cointegration tests and vector error correction models with time series data covering the periods of 1975-2007. Our investigation results confirm the existence of long-run relationships among Trade Balance(TB), Real Exchange Rate(RER), and foreign and domestic incomes for Cote d’Ivoire. Estimated results also demonstrate that the (RER) has a significant positive influence on Cote d’Ivoire’s trade balance in both short and long-run under fixed real exchange rate management policies for the considering period. The Granger Causality test shows that the (RER) does Granger causes the trade balance then, based on the estimations, the Marshall-Lerner condition in Cote d’Ivoire’s data is explored by utilizing the Impulse Response Function (IFR) which traces the effect of (RER) on the trade balance viewing the J-curve pattern.

Suggested Citation

  • Drama, Bedi Guy Herve, 2010. "The Effects of Real Exchange Rate on Trade Balance in Cote d’Ivoire: Evidence from the Cointegration Analysis and Error-Correction Models," MPRA Paper 21810, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:21810
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    References listed on IDEAS

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    Cited by:

    1. Yaya KEHO, 2021. "Asymmetric Effects of Real Exchange Rate on Trade Balance in Cote d’Ivoire: Evidence from Nonlinear ARDL Approach," Applied Economics and Finance, Redfame publishing, vol. 8(3), pages 9-21, May.
    2. Chassem, Nacisse Palissy, 2011. "Effets de long terme du taux de change réel sur la balance commerciale nominale et réelle en zone Franc africaine [Long-run effects of real exchange rate on the nominal and real trade balance in Af," MPRA Paper 30252, University Library of Munich, Germany.
    3. Bilal KARGI, 2014. "Time Series Analysis about the Relationship between Foreign Trade and Exchange Rate in Turkish Economy," Timisoara Journal of Economics and Business, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 7(2), pages 123-133, December.
    4. Yaya Keho, 2021. "Real Exchange Rate and Trade Balance Dynamics in Cote d Ivoire," International Journal of Economics and Financial Issues, Econjournals, vol. 11(1), pages 61-70.

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    Keywords

    Key words: Real exchange rate; Trade balance; Cointegration test; VAR model; Granger Causality; IFR.;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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