Abstract
This research paper is aimed to investigate the effect of currency depreciation on the Trade Balances of South Asian Countries. The analysis was based on Marshal-Lerner Model developed by Lerner, A. P. (1944) and J-curve. The Marshal-learner model is the extension of model of Marshall, A. (1923), which stated that devaluation or depreciation of currency makes exports relatively cheaper and imports relatively expensive. Making textual analysis of the available data from South Asian countries, the study makes predictions on the devaluation of currency, its causes and the consequences. The cross sectional data was tested via multiple regression analysis. Effects of currency depreciation on the trade balances of each individual country were then subjected to a comprehensive analysis. The study supports and confirms Marshal-Lerner Model highlighting that devaluation of currency does not always help improve balance of trade.
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