Abstract

The S-curve hypothesis postulates that the correlation coef ficient between the current exchange rate and past trade balance values may be negative. However, the correlation between the current exchange rate and future values of the trade balance may be positive. Previous research using aggregate trade flows between Brazil and rest of the world find weak support for the curve. When we disaggregate Brazil’s trade flows with the U.S. and investigate 95 industries that trade between the two countries, we find support for the S-curve in 51 industries. Small and large industries and durable and non-durable commodities are found to benefit from currency devaluation.

Full Text
Published version (Free)

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call