Dissertation Proposal

Dissertation Research Proposal A/07/268 1

1. INTRODUCTION

This fragment provides an initiation to the research problem and gives a distinctive

impression to the behavior of the exchange rate and the trade balance.

1.1. BACKGROUND OF THE STUDY

It is proposed to launch this study to investigate the exchange rate* behavior on trade

balance in Sri Lanka by using its 10 major trading partners. These partner countries are

selected by calculating the trade share. They are; USA, India, UK, Singapore, Japan,

Germany, Hong Kong, Iran, China and Saudi Arabia. Considering these countries the

effective exchange rates are calculated.

The exchange rate is one of the most important policy variables, which determines the

trade flows, capital flows, inflation, international reserve and remittance of an economy.

Exchange rate is the value of one currency in terms of another currency. The exchange rate

fluctuations can be seen in the floating exchange rate regimes and managed floating exchange

rate regimes. Sri Lanka is experienced depreciation except few years. The factors which are

affecting to the exchange rate movements are relative interest rate, relative inflation level,

relative income levels and etc. If we consider the Sri Lankan situation at the independence a

fixed exchange rate regime was operated linked to the Sterling Pound. And Since 1950s the

exchange rate was fixed. The direct regulations were imposed on foreign trade by the

socialist government in 1970-977. And the trade liberalization in 1997 leads the country to

follow a flexible exchange rate system. The rupee has continuously depreciated except the

years 2005, 2008 and 2010.

The dependent variable, trade balance** can be defined as the difference between exports

and the imports. This is also known as the Net Exports (NX). This trade balance is a

component of the Balance of Payments of a country.

*Exchange Rate: value of one currency in terms of another currency. **Trade Balance: The difference between the monetary values of exports and imports.


There are two major accounts in the Balance of Payments*. Those are Current Account**

and the Capital Account. The Trade Balance will be the first quarter of the current account

and it only records the exports and the imports. The trade balance can be negative, positive or

zero. Negative trade balance is occurred, when the imports exceed the exports. And when the

exports are greater than the imports there will be a trade surplus. Trade Balance will be

balanced when the exports are exactly equal to the imports. In Sri Lanka, after 1977 the

deficit was grown and it was filled by heavy borrowings. It is said that the Sri Lanka’s

Balance of trade in a Chronic deficit all over the period.

The relationship between these variables is generally measured using the behavior of the

Real Exchange Rate (RER) in terms of bi-lateral trade and Real Effective Exchange Rate

(REER) in multi-lateral trade and the impact is measured by some specific analytical tools.

Although there are number of other criterion used to measure the impact of exchange rate on

trade balance, to fill the research gap, it is proposed to use mainly the Granger Causality Test

in this research.

As a specific objective of this study it is proposed to investigate the validity of Marshal-

Learner Condition in Sri Lanka. According to the M-L condition, A depreciation of a

country’s currency will improve the current account balance if the sum of the price elasticity

of domestic and foreign demands for imports is larger than unity.

(Ie + Xe) >1

Ie Import Elasticity

Xe Export Elasticity

*Balance of payments: are the accounts which record foreign transactions systematically. **Current Account: shows all the flows that directly affect the national income.


1.2. BEHAVIOR OF THE VARIABLES

Behavior of the main variables over 33 years (1977-2010) reflected by the below graphs.

The Exchange Rate Behavior of Sri Lanka’s major trading partners against LKR

1 4 7 10 13 16 19 22 25 28 310

10

20

30

40

50

60

70

80

90

100

USAIND RSJAPANUKSINGAPOREGERMANYHONGKONGIRANCHINASAUDHI ARABIA

Sri Lanka’s Trade Balance Behavior

1 4 7 10 13 16 19 22 25 28 31 34

-10000

-5000

0

5000

10000

15000

20000

EXPORTSIMPORTSTrade Balance

According to the literature there is a considerable relationship between these two

variables in Sri Lanka. Depreciation has been instrumental in making a favorable impact on

the trade balance (Wijesinghe 1988). And also Silva & Zen (1998) found that the exchange

rate policy after 1977 has improved the trade balance but has failed to stimulate real output at

least in the short run. These things are widely discussed under the literature review.


2. LITERATURE REVIEW.

2.1. EMPIRICAL STUDIES IN SRI LANKA.

According to De Silva D.G. and Zen Zhu (1998), the changes in Sri Lanka’s Trade

Balance affected by changes in the exchange rate since 1977. This study has shown that it is

impossible to detect any positive effect on GDP in Sri Lanka due to currency depreciation*.

The study period was 1977-1997.VAR Analysis has been used to identify shocks and fully

control important external shocks that affect economic performance. There were two

exogenous variables used as Government Expenditure and Foreign Direct Investment. And

endogenous variables were GDP, Trade Balance, Nominal Interest Rate and CPI. The Co

integration model was estimated, which comprised of four endogenous variables (GDP,

Trade Balance, CPI, Real Exchange Rate). Then by adding one variable at a time, the study re

estimated the model and investigates the effects of exchange rate on Trade Balance and GDP.

And also allowed for determination of the stability of the results.

Wijesinghe D.S.(1988) has found that the Nominal Exchange Rate changes has

caused improvements in Sri Lankan Trade Balance in most of the years (study period 1971-

1985). And the improvements were largely contributed by the depreciation of the Sri Lankan

rupee. The Trade Balance effect of real exchange rate changes had not been so impressive

due to the high rates of inflation which prevailed in Sri Lanka in most of the years. The effect

of the unfavorable price changes on export earnings were moderated or more than

compensated for by the depreciation of the Sri Lankan rupee which induced increased in the

export volume. In the case of real exchange rate changes, the price of imports recorded

increases in most of the years. The movements of the index of nominal effective exchange

rate computed with the trade balance objective closely reflected the effect of exchange rate

changes on Sri Lanka’s trade balance. He has calculated Effective Exchange Rates by using

the variables, exports, imports etc.


Further, W.T.K.Perera (2009) has done this study to find the impact of real

depreciation of SLR on the trade balance in the short run and the long run (1970-2008),

employing bilateral trade data between Sri Lanka and its six major trading partners. There

was no specific pattern for the trade balance between Sri Lanka and its trading partners in

response to the change in real exchange rate, and none of the cases supported the J-curve

phenomenon. In the long run, only in the cases of India and Singapore has there been a

positive and significant impact on trade balance with the depreciation of the SLR. This study

emphasized that Sri Lanka has to take action to improve its income from exports and reduce

the expenditure on imports to overcome the problem in the trade deficit. The study also

revealed that both domestic and trading partners’ real incomes were important determinants

of Sri Lanka’s trade balance.

2.2. EMPIRICAL STUDIES IN OTHER COUNTRIES

Nusrate Aziz (2008) have done the Bangladesh study for 1972-2005 study period.

Mainly he has found that the Real Exchange rate has a positive effect on Balance of Trade in

in Bangladesh in the long run. Both the Engle-Granger and the Johansen test confirmed the

presence of a long run co integrating relationship among the variables of interest in the study.

The study also suggested that the real exchange rate has a significant impact on balance of

trade of Bangladesh both in the short-run and long-run. The Granger causality test proved the

causal relation between exchange rate and balance of trade of Bangladesh. The IRF also

supported the above mentioned positive impact of real effective exchange rate on balance of

trade in the long run. The study clearly indicated that real depreciations of exchange rate have

been positively associated with improvement of balance of trade. In the first step the long-run

equilibrium relation among the variables has been estimated. In the second step, they tested

the order of integration of residuals using ADF statistic.


The study done by Ng Yuen-Ling (2008) attempted to identify the relationship

between the real exchange rate and trade balance in Malaysia from year 1955 to 2006. This

study used Unit Root Tests, Co integration techniques, Engle-Granger test, Vector Error

Correction Model (VECM), and impulse response analyses. The main findings of this paper

were: (i) long run relationship exists between trade balance and exchange rate. Other

important variables that determine trade balance such as domestic income showed a long run

positive relationship between trade balances, and foreign income shows a long run negative

relationship (ii) the real exchange rate was an important variable to the trade balance, and

devaluation will improve trade balance in the long run, thus consistent with Marshall-Lerner

condition (iii) the results indicate no J-curve effect in Malaysia case. In this research, the

results supported the empirical validity of the Marshall-Lerner condition through VECM,

indicating that depreciation has improved the trade balance.

Pavle Petrovic (2009) has found that exchange rate depreciation in Serbia improved

trade balance in the long run (2001-2007), while giving rise to a J-curve effect in the short

run. Both Johansen’s and autoregressive distributed lag approach were respectively used

giving similar long-run estimates showing that real depreciation improved trade balance.

Corresponding error correction models as well as impulse response functions indicated that,

following currency depreciation, trade balance first deteriorated before it later improves,

exhibiting the J-curve pattern. The main findings of the paper were that a real exchange rate

depreciation has a significant positive long run impact on the trade balance in Serbia, and that

in the short run trade balance first deteriorated before it later improves. The corresponding

error correction models (ECM) of trade balance captured its short run movements and

indicated the existence of the J-curve effect.


The Japanese study is done by Shao Zaiwei (2008) and identified the major economic

factors that influenced the bilateral trade balance between Japan and the US. Differing from

conventional elasticities approach, one more variable the net foreign assets were added in the

Vector Auto regression estimation using quarterly data from 1980: I to 2006: IV. The

Johansen and Juselius result indicated three long-run relationships among five macro

variables: trade balance, domestic income, foreign income, net foreign assets and real

exchange rate. Short run adjustment parameters were identified as coefficients of the error

correction terms. The main finding of this paper was that taking the valuation effect of the net

foreign asset position into account, the final effect of the exchange rate changes on trade

balance was undetermined. Although appreciation could reduce trade surplus in the short run,

in a longer horizon, there was no stable relationship. Besides that, Granger causality

procedure is carried out to investigate the causal relationship and directions of causality

between the variables. Finally, Impulse Response Analysis and Variance Decomposition

procedure are performed to provide more insight into short run interaction between trade

balance and those endogenous variables in the system.

Suleiman Monammad (2010) done this study and identified the depreciation of

domestic currency lead to unexpected falls in eport earnings in Pakistan. The study examined

validity of the Marshall Lerner condition in Pakistan data (1970-2008) by using impulse

response function which fulfills the J- curve idea. To evaluate long run association among the

variables by employing Johansson Co integration test. The end consequence of test showed

that there was a long run relationship among the variables at vector two. The finding of this

research paper showed that real depreciation of exchange rate has positively impact on

balance of trade. So the depreciation is in favor of Pakistan’s export.


Tihomir Stucka (2004) done his research for 1994-2002 and used a reduced-form

model approach was used to estimate the trade balance response to permanent domestic

currency depreciation in Croatia. For this purpose, long-run and short-run effects were

estimated, using three modeling methods along with two real effective exchange rate

measures. Evidence of the J-curve was also found. This attempted to estimate the impact of a

permanent exchange rate depreciation on the merchandise trade balance employing a reduced

form model. The model was estimated using three methods - the ARDL "delta" approach

developed by Pesaran, Shin, and Smith (1996). This study found evidence of the J-curve

effect in Croatia. The increase of the trade balance deficit as a consequence of the J-curve

effect is estimated to be between 2.0 percent and 3.3 percent. The empirical results were

consistent with the exception of one model. Overall, intuitively it seemed unlikely that a

permanent nominal depreciation of the domestic currency embodied in an asymmetric

intervention policy a pegged exchange rate regime would have a net favorable effect on the

entire economy, taking into account potential negative side effects.

Further Quio, H., (2005) did his study for East Asian Economies for the time period

of 1978-2004, to identify the post impact of a discrete exchange rate change and its

implications for net trade balance. He emphasized the difference between dollar debtor and

dollar creditor countries and concluded that even though currency devaluation may improve

the trade balance of a debtor country, appreciation may or may not reduce the surplus of a

creditor country. It was therefore inappropriate to follow the elasticity models to use

exchange rate to adjust trade balance predictably when the wealth effect, investment effect

and indirect investment effect (in East Asia) were all considered. His model attested that

such a move may not induce a reduction in the trade surplus.


Sekantsi. L.(2008), empirically examined the impact of real exchange rate volatility

on trade in the context of South Africa’s exports to the U.S. for the South Africa’s floating

period January 1995-February 2007. In measuring real exchange rate volatility, this study

utilized GARCH. After establishing the existence of cointegration among the variables

involved in our two-country export model, he estimated long-run coefficients by means of

ARDL bounds testing procedure proposed by Pesaran, et al.(2001). His results indicated that

real exchange rate volatility exerts a significant and negative impact on South Africa’s

exports to the U.S. Therefore, stable and competitive exchange rate and sound

macroeconomic fundamentals were required in order to improve international

competitiveness and greater penetration of South African exports to international markets.

Monacelli,T., & Perotti,R.,(2006) employed structural VAR techniques to estimate,

for a series of OECD countries. They have found that in all countries a rise in government

spending induces a real exchange rate depreciation and a trade balance deficit. In the US,

however, the effect on the trade balance is small. They have shown how recent empirical

evidence that points to a decline in the trade deficit after a budget deficit shock can be traced

to an alternative method to recover the fiscal shocks. Second, in all countries private

consumption rose in response to a government spending shock, and therefore co-moves

positively with the real exchange rate.


2.3. RESEARCH GAP

De Silva D.G. and Zen Zhu (1998), has not speculated the causal relationship between the

exchange rate and the trade balance. And his study stands for 1977-1997. No studies were

conducted to fill this time gap (1997-2010). Wijesinghe D.S.(1988) analyzed his findings by

calcualating the Effective Exchange Rates, but has not used any of the econometric tools for

the analysis. And his study flows for the period 1971-1985. Silva has filled his time gap by

12 years (1985-1997). But no studies have been done to fill the remaining 13 years.

W.T.K.Perera (2009) has found the impact of real depreciation of SLR on the trade balance

in the short run and the long run by using its 6 major trading partners. And he has employed

mainly the J curve phenomenon. In this study it is proposed to add 4 more major trading

partners (Singapore, Iran, China and Saudi Arabia) and more econometric tools are proposed

to use.

The geographical gap can be taken from the empirical studies in the other countries,

and also throughout the literature there is no study has done for the causal impact of exchange

rate on trade balance except the Malaysian case. Other than that the trade balance behavior

due to the external shocks is not investigated for the Sri Lankan case.

Considering these gaps, it is proposed to fill them by employing the Granger Causality

test and the Impulse Response Function. And the other econometric tools will be applied for

the performance of the study. As a result of these applications, the time gap will be

instinctively filled.


3. PROPOSED RESEARCH

3.1. RESEARCH PROBLEM

Based on the research gap which is identified by the literature, it is proposed to investigate

whether the exchange rate has a significant impact on trade balance in Sri Lanka. Then the

fundamental research problem will be;

Do the Exchange Rate changes affect the trade balance effectively?

Two macroeconomic variables are used in this research, namely Exchange Rate and Balance

of Trade. And the literature proves that there is a significant impact of exchange rate on trade

balance in Sri Lanka.

The exchange rate policy after 1977 has improved the trade balance, but has failed to

stimulate real output at least in the short run (Silva D. & Zhen Z. 1998).Depreciation has

been instrumental in making a favorable impact on the trade balance during the study period

except for the years 1971, 1979,1985 (Wijesinghe D.S. 1988).

Therefore, it is investigated that the exchange rate affects the balance of trade in Sri Lanka.

But there were no studies done to fill the time gap after 1997. Furthermore the causal impact

is not found. Then this study is done to fill these gaps by mainly using the Granger Causality

Test, Impulse Response Function and the other econometric tools.

In addition to the above fundamental research problem, it is proposed to identify the

existence of Marshal-Learner Condition by elasticity approach. Other than that the existence

of J curve phenomenon has to be identified.


3.2. HYPOTHESIS

Impact of exchange rate changes on trade balance.

H0: Exchange Rate Changes do not affect the Trade balance.

H1: Exchange Rate depreciation improves the trade balance.

Existence of Marshal Learner Condition in Sri Lanka.

H0: Depreciation will not improve the trade balance even though the condition is hold.

H1: Depreciation will improve the current account if the sum of the price elasticity of

domestic and foreign demands for imports is larger than unity.

3.3. OBJECTIVES

Main Objective

To investigate the impact of exchange rate changes on trade balance in Sri Lanka.

Specific Objectives

To analyze the time series properties of the variables used in this study.

To understand the behavior of the variables in Sri Lanka.

To analyze the short run and long run effect of exchange rate changes on the trade.

To investigate the existence of Marshal Learner condition in Sri Lanka.

To identify the J curve phenomenon in Sri Lanka.

To suggest the policy implications.


3.4. IMPORTANCE OF THE STUDY.

The LKR is continuously depreciated all over the study period except some years. It is

expected that this would improve the trade balance, reduce inflation, and increase the rate of

output. The importance of this study lies in the evaluation of currency devaluation as a long-

term developmental policy in Sri Lanka that can serve as a model for other country studies.

The Central Bank uses devaluation as a policy tool for economic growth. Therefore if there is

such a relationship found, it can be mainly beneficial for two parties. Those are;

i. Policy Makers

The Trade Balance is the dependent variable. It is a component of the Balance of Payments.

Therefore Balance of Payments can significantly influence the country’s GDP. The GDP will

determine the health of an economy. Then if a relationship found between the trade balance

and exchange rate, it can be manage in policy making.

ii. Exporters

When the exchange rate is devaluated, the domestic currency will be weaker against the

foreign currency. And the local exporters are benefited. And If there is such a relationship is

investigated, it can be positively applied to the predictions of these exporters.


4. METHODOLOGY

This fragment concise the main variables, the frequency of data, the source of data study

period, and the econometric methods.

4.1. MAIN VARIABLES

Several variables are used in the calculations. Namely, exports, imports, trade share,

consumer price index, GDP, GDP deflator, Nominal Exchange Rate, Real Exchange Rate,

Nominal Effective Exchange Rate and Real Effective Exchange Rate.

I. Exports and Imports

These are the basic variables in this study. All the calculations are based on exports and

imports. Exports are used to calculate the Export Share and the Export Share is used in

calculating Effective Exchange Rates. Imports are used to calculate the Import share and it is

used to calculate the Effective Exchange Rates.

II. Trade share

X= Exports

M= Imports

i = Major trading partners

Using this equation the major 10 trading partners are found. Those are;

USA, India, Japan, UK, Singapore, Germany, Hong Kong, Iran, China and Saudi Arabia.

Trade Share =(X+M ) i

total (X+M )d


III. Consumer Price Index(CPI)

Consumer Price Index is used to convert the nominal terms into the real terms. In this

research two basic real terms are calculated. Those are the Real Exchange Rate and the Real

Effective Exchange Rate. To do these calculations the Consumer Price Index will be used.

IV. Nominal Exchange Rate

The nominal exchange rate is used to calculate the other RER, NEER & REER. It includes

the inflationary impact.

V. Real Exchange Rate

The RER between two currencies is the product of the nominal exchange rate. It is calculated

by using the Nominal Exchange Rate.

VI. Nominal Effective Exchange Rate (NEER)

The Nominal Effective Exchange Rate measures the average change of a country’s exchange

rate against all other currencies.

R= Exchange Rate ( major trading partners)

W= Trade Share

NEER=∏j=1

m

r1j

W j


VII. Real Effective Exchange Rate (REER).

The Real Effective Exchange Rate adjusts NEER by appropriate foreign price level and

deflates by the Sri Lankan price level.

Pdi= Domestic CPI

Pfi= Foreign CPI

R = Exchange Rate

4.2. FREQUENCY AND SOURCE OF DATA

Data come from the Central Bank (CBSL) Annual Reports, IMF Publications and

Econstat data of the World Bank. All the data are in US Dollar Billions. The

study employed 33 annual observations (1977-2010) of Sri Lanka and the

annual data is used because quarterly data of some relevant variables are

not available.

4.3. STUDY PERIOD

The study period is 1977-2010, Because the Exchange rate and the trade balance become

substantial with the trade liberalization in 1977.

REER=∏j=1

m

(r PdiPfij

)wi


4.4. THE MODEL

This study attempts to develop a similar model applied by Aziz N.(2008)

for Bangladesh, that the trade balance is a function of real exchange rate

and the domestic and foreign real income. A log-linear specification of the

model can be stated as follows:

lnTB = β0 + β1 lnREER + β2 lnY+ β3 lnY*+ ui

Where, lnTB, lnX, lnM imply logarithm of balance of trade (lnX-lnM),

exports and imports at time respectively. lnREER, InY, In Y* are logarithm of

real effective exchange rate, Real GDP and world real industrial production

index (proxy of trade partners income).


4.5. ECONOMETRIC TOOLS

I. Granger Causality Method

The Granger causality test is a statistical hypothesis test for determining whether one time

series is useful in forecasting another. There is an interpretation of a set of tests as revealing

something about causality. To identify the causal impact of exchange rate on Balance of

Trade, the Granger Causality Test can be applied.

II. Impulse Response Functions (IRF)

This can be used to measure the trade balance behavior due to the external shocks. This

represents the reactions of the variables to shocks hitting the system. And this test is tested to

identify the trade balance behavior due to the external shocks. An impulse response refers to

the reaction of any dynamic system in response to some external change (Lin, 2006). It is an

essential tool in this empirical causal analysis.

III. Graphical methods and summary statistics

The variables can be described by the graphical methods and summary statistics. There are

various variables are used in this research. And all the data is having the time series property.

There is a pattern of observed time series data. When the pattern is identified, the

interpretation can be done. The graphical methods and Summary statistics can be used to

show this relationship in a visible and understandable manner. So it can be used in analyzing

the results of this research.

IV. Vector Auto Regression

http://en.wikipedia.org/wiki/Time_series


http://en.wikipedia.org/wiki/Statistical_hypothesis_testing


This can be used to check the linear interdependencies among multiple time series and can be

used in structural models with simultaneous equations.

V. Unit Root Test

To identify the order of time series properties of this study unit root test is proposed to

employ. To test the stationary of the time series this is basically used. If one or both of the

series are non-stationary, the standard OLS approach will produce a spurious regression, thus

rendering standard testing techniques invalid (Fuei, 2007).

VI. Johansen’s Cointegration Method

This is a non stationary method. This study employs Johansen’s Cointegration method to

investigate both long-run and short-run relationship between the Exchange rate and the trade

balance.

VII. Autoregressive Distributed Lag Model (ARDL Model)

This study also employs ARDL model to investigate the long-run relationship Exchange Rate

and Trade Balance. This method does not require both variables to be non-stationary at the

same level or integrated in the same order.

VIII. Error Correction Model

An error correction model is a dynamical system with the characteristics that the deviation of

the current state from its long-run relationship will be fed into its short-run dynamics. A

rough long-run relationship can be determined by the cointegration vector, and then this

relationship can be utilized to develop a refined dynamic model.

http://en.wikipedia.org/wiki/Cointegration

http://en.wikipedia.org/wiki/Dynamical_system

http://en.wikipedia.org/wiki/Simultaneous_equations_model

http://en.wikipedia.org/wiki/Structural_equation_modeling


http://en.wikipedia.org/wiki/Linear_dependence


REFERENCES

I. Rose, A. K., (1991), The role of exchange rate in a popular model of international

trade: Does the Marshall-Lerner condition hold? Journal of International Economics,

30, 301-316.

II. Santos-Paulina, A. U. (October, 2002), Trade Liberalization and Export Performance

in Selected Developing Countries, Journal of Development Studies, 39:1, 140-164.

III. Weerasekara, Y.M, (1992), Nominal and Real Effective Exchange Rates for the

SEACEN Countries: The South East Asian Central Banks (SEACEN).

IV. De Silva, D.K, (1998), Sri Lanka’s Experiment with Devaluation: The International

Trade Journal, Volume 16, No.04.

V. Wijesinghe, D.S.,(1988), Effective Exchange Rate Changes and their Impact on the

Trade Balance: SEACEN Research and Trainig Unit, Kuala Laumpur.

VI. Aziz, N.,(2008),The Role of Exchange Rate in Trade Balance: Empirics from

Bangladesh, C22,F31.

VII. Qioy, H., (2005), Exchange Rates and The Trade Balances Under the Dollar

Standards: Stanford Center for International Development, Working Paper 05.

VIII. Shao,Z.,(2008), Exchange Rate Changes and Trade Balance; An Empirical Study of

the Case of Japan, Dissertation and Theses collection, Singapore Mangement

University.


IX. Ling,N.Y.,(2008), Real Exchange Rate and Trade Balance Relationship: International

Journal of Business and Management, Vol.3.,No8.

X. Pavle, P.,(2009),Exchange Rate and Trade Balance: Panoeconomics, 2010,1,pp23-41.

XI. Mohammad, S.D., The Role of Exchange Rate Changes on Trade Balance: Emperical

from Pakistan, European Journal of Social Sciences, Vol.14, no.1, 2010.

XII. Sekansti, L.,(2008), The Impact of Real Exchange Rate Volatility on South African

Exports to the United States: National University of Lesotho, JEL Classification: F10,

F31.

XIII. Monacelli,T., & Perotti,R.,(2006),Fiscal Policy, the Trade Balance, and the Real

Exchange Rate: Implications for International Risk Sharing.

XIV. WWW. Wikipedia .com.

APPENDICES

Some of the data which have been collected by this time are attached in this section.

Dissertation Proposal

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