Testing the Short- and Long-Run Exchange-Rate Effects on the Trade Balance: The Case of Colombia

Abstract

The primary objective of this chapter is to examine the role of the exchange rate in determining short- and long-run trade-balance behaviour for Colombia in a model which includes money and income. That is, the aim is to examine whether the trade balance is affected by the exchange rate, and whether hypotheses such as the Bickerdike, Robinson Metzler model (BRM), the Marshall-Lerner conditions, or J-curve type of hypotheses hold for current data. In addition, to test the empirical relevance of the absorption and monetary approaches for these data.