Relationship between real effective exchange rate and trade balance, considering savings rate: Smooth Transition Regression (STR) Approach

Subject Areas : Financial Knowledge of Securities Analysis

M. Mahdi Barghi Oskooei ¹ , Alireza Kazerooni ² , Behzad Salmani ³ , Saber Khodaverdizadeh ⁴

1 - Associate Professor of Economics, Tabriz University, Tabriz, Iran.
2 - Professor of Economics, Tabriz University, Tabriz, Iran.
3 - Professor of Economics, Tabriz University, Tabriz, Iran.
4 - Ph.D. Student of International Economics, Tabriz University, Tabriz, Iran

Received: 2017-03-03 Accepted : 2017-05-31 Published : 2019-01-21

Keywords: The trade balance, saving rate, real effective exchange rate, smooth transition regression,

Abstract :

Among the important policy objectives and economic programs, the implementation of policies for reducing the trade deficit. Empirical studies provided conflicting results regarding the effect of devaluations on the trade balance reached. This study aimed to investigate the nonlinear relationship between the real effective exchange rate and trade balance, considering the savings rate using a smooth transition regression approach during period 1960-2014. The results of smooth transition regression (STR) model estimation, confirmed that the savings rate had non-linear effect on the trade balance. Our estimation results showed that effectiveness of savings rate, the real effective exchange rate and terms of trade on trade balance depended to the regimes which Iranian economy was in there. Also we fund that generally in first regime savings rate and the effective real exchange rate had statically meaningful and positive effect on the trade balance and the terms of trade had a statically meaningful and negative effect on the trade balance. While crossing the threshold and entering into the second regime savings rate and terms of trade coefficients had statically meaningful and positive effect, but the real effective exchange rate had a statically meaningful and negative impact on the trade balance

References:

*      اخباری، محمد و خوشبخت، آمنه (1385). " پویایی­های تراز تجاری: بررسی منحنی جی شکل ارتباط تراز تجاری ایران با آلمان" ، مجله تحقیقات اقتصادی، دوره 41، شماره 3، صص 160-123.

*      پدرام، مهدی؛ شیرین­بخش، شمش­الدین و رحمانی، مریم (1390)، پویایی­های منحنی جی در تجارت خارجی ایران، فصلنامه پژوهش­ها و سیاست­های اقتصادی، دوره 19، شماره 60، صص 18-5.

*      حیدری، حسین؛ صالحیان، زهرا و فیضی، سلیمان (1393)، تحلیل واکنش تراز تجاری ایران نسبت به تغییرات نرخ ارز با استفاده از رویکرد پارامتر زمان ـ متغیر، فصلنامه پژوهش­های اقتصادی، دوره14، شماره 3، صص 99-67.

*      دژپسند، فرهاد و گودرزی، حسین(1388)." بررسی تأثیر کاهش ارزش پول بر تراز پرداخت­های خارجی ایران" ، پژوهشنامه اقتصادی، دوره 9، شماره 3، صص 41-15.

*      راسخی، سعید؛ منتظری، مجتبی و پاشازانوس، پگاه (1393)." واکنش غیرخطی نامتقارن تراز تجاری به تغییرات نرخ واقعی ارز: مطالعه موردی ایران" ، فصلنامه سیاست­های مالی و اقتصادی، دوره 2، شماره8، صص 62-41.

*      لطفعلی­پور، محمدرضا و بازرگان، بهاره (1395)." بررسی آثار تغییرات نرخ ارز حقیقی موثر، صادرات و واردات بر تراز تجاری ایران:، فصلنامه پژوهش­های اقتصادی ( رشد و توسعه پایدار)، دوره16، شماره1، صص 94-73.

*      مهرآرا، محسن و عبدی، علیرضا (1386)." عوامل تعیین­کننده تراز تجاری در کوتاه­مدت و بلندمدت و هم­چنین پدیده منحنی جی در اقتصاد ایران" ، فصلنامه پژوهش­های اقتصادی ایران، دوره 9، شماره 31، صص 26-1.

*      منکیو، گریگوری (1391)." کلیات علم اقتصاد، ترجمه: حمیدرضا ارباب، تهران: نشرنی، چاپ اول.                                  

*      نوفرستی، محسن (1379)." تحلیل آثار سیاست­های پولی و ارزی به روش هم­جمعی در چارچوب یک الگوی اقتصادسنجی کلان پویا"، پایان­نامه دکتری، دانشگاه شهیدبهشتی.

*      Bahmani-Oskooee, M., Harvey, H., Hegerty, S.W. 2014. Industry trade and exchange-rate fluctuations: evidence from the U.S. and Chile. Int. Rev. Econ. Finan. 29, pp. 619–626.

*      Bahmani-Oskooee, M & Rehman, H. 2005. Stability of the money demand function in Asian developing countries. Applied Economics. 37(7), pp.773-792.

*      Blanchard, O.J., Milesi-Ferretti, G.M. 2012. (Why) Should current account balances be reduced. IMF Econ. Rev. 60, pp.139–150.

*      Chiu,Y and D.SUN, CH. 2015. The role of savings rate in exchange rate and trade imbalance nexus:Cross-countries evidence. Economic Modeling. 52(8), pp. 1017–1025.

*      Engel, C., Rogers, J.H. 2006. The U.S. current account deficit and the expected share of world output.  J. Monet. Econ. 53, pp. 1063–1093.

*      Feldstein, M. 2008. Resolving the global imbalance: the dollar and the U.S. saving rate.J. Econ. Perspect. 22(3), pp.113–125.

*      Gervais,O. and Schembri, and .L. Suchanek,L. 2016. Current account dynamics, real exchange rate adjustment, and the exchange rate regime in emerging-market economies. Journal of Development Economics. 119, pp. 86-99.

*      Habermeier, K., Mesquita, M. 1999.  Long-Run Exchange Rate Dynamics: A Panel Data Study, IMF Working Paper WP/99/50, International Monetary Fund, Washington. DOI:http://dx.doi.org/10.5089/9781451846959.001

*      Hanafia, H and M. Bahmani Oskooee. 2010. The J-curve: Malaysia versus major her trading partner.  Applied Economics. 42, pp.1067-1076.

*      Hacker, R.S. and A. Hatemi. 2003. Is the J-Curve Effect Observable for Small North European Economies. Open Economies Review. 14(2), pp. 119-134.

*      Lee, J.-W., Mckibbin, W.J., Park, Y.C. 2006. Transpacific trade imbalances: causes andcures. World Econ. 29(3), pp. 281–303

*      McKinnon, R.I. 2007. The transfer problem in reducing the U.S. current account deficit. J. Policy Model. 29(5), pp. 669–675.

*      Magee, S. P. 1973. Currency Contracts Pass-Through and Devaluations. Brookings Papers on Economic Activity. 2, pp. 303-325.

*      Moura, Guilherme and Da Silve, Sergio. 2003. Is There a Brazilian Jcurve.  Economic Bulletin, 6(10), pp. 1-15.

*      Olivei, G. (2000). The Role of Savings and Investment in Balancing the Current Account: Some Empirical Evidence from the United States. New England Economic Review.

*      *Oskooee, M. and Beak,J. (2016). Do exchange rate changes have symmetric or asymmetric effects on the trade balance? Evidence from U.S.–Korea commodity trade. Journal of Asian Economics, 45: 15-30.

*      Pilbeam. K.S. 1991. Exchange Rate Management: Theory and Evidence (London): Palgrave Macmillanl.

*      Sun,Y. (2011). Structural change, savings and current account balance. International Review of Economics and Finance. 20(1):82-94.

*      Van Dijk, D. 1999. Smooth Transition Models: Extensions and Outlier Robust Inference. PhD Thesis, Erasmus University Rotterdam.

*      Wang, C.-H., Lin, C.-H.A.&Yang, C.-H.( 2012). Short-run and long-run effects of exchange rate change on trade balance: evidence from China and its trading partners. Jpn. World Econ, 24(4), 266–273.