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Real exchange rate and bilateral trade balance of Cambodia: A panel investigation

Abstract : This article investigates the relationship between Cambodia's bilateral trade balance and its fundamental determinants: the real exchange rate and real income differentials between Cambodia and its foreign trading partners. The Panel Fully Modified Ordinary Least Squares method is applied to a sample of 10 trading partners for the 1998–2014 period on a quarterly basis. The main findings suggest that a devaluation of the real exchange rate significantly improves bilateral trade balance. However, it is not possible to prove that any modification of the real exchange rate will cause a trade balance adjustment that follows the standard J-curve shape, although two of the 10 sampled countries are exceptions. The model also shows that higher foreign partner real incomes relative to domestic real income levels cause a significant inverse change in bilateral trade balance for five of the sampled countries, suggesting that Cambodia is highly dependent on imports.
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Submitted on : Friday, October 6, 2017 - 5:52:00 PM
Last modification on : Tuesday, April 12, 2022 - 4:12:03 PM


  • HAL Id : hal-01612436, version 1



yannick Bineau. Real exchange rate and bilateral trade balance of Cambodia: A panel investigation. Economics Bulletin, Economics Bulletin, 2016, 36. ⟨hal-01612436⟩



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