Improving Australia's trade balance: A case study of agro‐forest and fish products

Abstract

AbstractThe impact of the exchange rate (ER) on the trade balance (TB) has been discussed for many years. However, the issue has not been discussed in sufficient depth, especially in relation to the TB of agricultural products. This paper will gauge this impact on Australia, which has much potential for agro‐based trade in the world market. We have applied the Bahmani‐Oskooee and Hosny's approach of the linear autoregressive distributed lag model to estimate the Marshall–Lerner condition (MLC) regarding the trade of Australian agro‐forest and fish (AFF) products with its five major partner countries. Quarterly data will be used for the period 1988Q1–2020Q4. Our findings support the MLC in case of the major share of Australian AFF trade. The implication is that if the market force depreciates Australian ER, the country's AFF TB will improve in the long‐run.