Abstract
The Marshall-Lerner condition postulates that if the sum of import and export demand elasticities add up to more than one, devaluation should improve the trade balance in the long-run. This paper is the first to employ a long-run method, i.e., cointegration technique to estimate trade elasticities in less develop countries. In most cases the results reveal that indeed trade elasticities are large enough to support devaluation as a successful policy to improve the trade balance. [F10, F31]
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