Does Currency Devaluation Improve the Trade Balance in the Long Run? Evidence from Malawi

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Periodical article

Title:	Does Currency Devaluation Improve the Trade Balance in the Long Run? Evidence from Malawi
Authors:	Musila, Jacob Wanjala Newark, John
Year:	2003
Periodical:	African Development Review
Volume:	15
Issue:	2-3
Period:	December
Pages:	339-352
Language:	English
Geographic term:	Malawi
Subjects:	devaluation terms of trade Development and Technology Economics and Trade
External link:	https://onlinelibrary.wiley.com/doi/10.1111/j.1467-8268.2003.00076.x/pdf
Abstract:	This paper explores the impact of nominal exchange rate devaluation on the trade balance for Malawi. A small-open economy IS-LM aggregate supply model of Malawi estimated using time series data covering the period 1967-1996 is used in the simulation analysis. The results of the simulation experiment show that devaluation helps to improve export performance and to curtail the growth of imports in the long run, which leads to improvement in the trade balance position. The results provide evidence supporting the view that nominal devaluation can indeed be a quite powerful tool in minimizing the imbalances in Malawi's international trade. Bibliogr., notes, sum. in English and French. [Journal abstract]