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Regime changes and the impact of currency depreciations: the case of Spanish–US industry trade

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  • Mohsen Bahmani-Oskooee
  • Hanafiah Harvey
  • Scott Hegerty

Abstract

Over the past half century, Western Europe has been part of varying currency regimes. Yet, whether under Bretton Woods, the European Monetary System, or the Euro, exchange-rate fluctuations have had an influence on these countries’ trade flows with the United States at the national and the industry level. This study looks at the case of Spain, examining the role of real exchange-rate fluctuations on trade with the United States for 74 industries. We find that the trade balances of only 40 industries are cointegrated with their macroeconomic determinants, but that 26 of these respond positively in the long run to a real depreciation. While industry characteristics do not seem to explain which industries are more likely to do this, we find that a relatively large share of industries in the Machinery sector see their trade balances improve after a depreciation. Copyright Springer Science+Business Media, LLC. 2013

Suggested Citation

  • Mohsen Bahmani-Oskooee & Hanafiah Harvey & Scott Hegerty, 2013. "Regime changes and the impact of currency depreciations: the case of Spanish–US industry trade," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 40(1), pages 21-37, February.
    • Handle: RePEc:kap:empiri:v:40:y:2013:i:1:p:21-37
    DOI: 10.1007/s10663-011-9176-1
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    References listed on IDEAS

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    18. Mohsen Bahmani & Hanafiah Harvey & Scott W. Hegerty, 2013. "Empirical tests of the Marshall-Lerner condition: a literature review," Journal of Economic Studies, Emerald Group Publishing, vol. 40(3), pages 411-443, May.
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    1. Bahmani-Oskooee, Mohsen & Harvey, Hanafiah & Hegerty, Scott W., 2014. "Industry trade and exchange-rate fluctuations: Evidence from the U.S. and Chile," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 619-626.
    2. Javed Iqbal & Sabahat Aziz & Misbah Nosheen, 2022. "The asymmetric effects of exchange rate volatility on US–Pakistan trade flows: new evidence from nonlinear ARDL approach," Economic Change and Restructuring, Springer, vol. 55(1), pages 225-255, February.

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    More about this item

    Keywords

    Depretiation; Trade balance; Spain; United States; Industry data; Bounds testing; F31;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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