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Exchange Rate, Competitiveness and Balance of Payment Performance

Author:

UP Alawattage

LK
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Abstract

This paper examines the effectiveness of exchange rate policy of Sri Lanka in achieving external competitiveness since liberalization of the economy in 1977. The conventional two-country trade model that explains the traditional approach to Balance of Payment (BOP) was applied using quarterly data covering the period of 1978:1 to 2000:4. Results reveal that the Real Effective Exchange Rate(REER) does not have significant impact on improving the Trade Balance (TB) particularly in the short run implying a blurred J-Curve phenomenon. Even though the cointegration tests reveal that there is a long run relationship between TB and the REER it shows very marginal impact in improving TB in long run. (JEL F40, O24)  

DOI: 10.4038/ss.v35i1.1234

Staff Studies Volume 35 Numbers 1& 2 2005 p.63-91

How to Cite: Alawattage, U., (2009). Exchange Rate, Competitiveness and Balance of Payment Performance. Staff Studies. 35(1), pp.63–91. DOI: http://doi.org/10.4038/ss.v35i1.1234
Published on 15 Oct 2009.
Peer Reviewed

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