Abstract
Therefore, this approach is all about the current account of the balance of payments, paying no attention to the capital account and the financial account of the balance of payments. Although the model is on the interaction between the exchange rate and the current account balances, it is largely applied to evaluate the effect of currency depreciation or currency appreciation on the balance of payments current account. In particular, it is applied to examine if a kind of currency depreciation helps improve current account balances. The current account balance examined here is, more exactly, trade balance defined as exports minus imports, leaving out income receipts/payments and current transfers:
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