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guys plz tell me what exactly is marshall lerner's cndn ....is it dNX/de>0 or <0
after going through wiki and dse papers...this is what i have concluded 1) if e= EP^*/P ie e= so many domestic currency /foreign currency....then dNX/de>0 2)if e= EP/P^* ie e = so many foreign currency/domestic currency then dNX/de<0 plz clear my doubts.... |
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If, E = domestic currency in terms of foreign currency, and
e = real exchange rate(domestic good in terms of foreign good) then, [e = Ep/p*, where p is domestic price level and p* is foreign price level] NX = X - IM/e IM/e as imports have to be valued in terms of domestic good. If we depreciate the currency, assuming constant price levels, that implies depreciation of e, then X increases and IM decreases but the value of import increases. What Marshal-Lerner condition specifies is the increase in NX with real depreciation, i.e., dNX/de < 0. Also, empirically it is found that Marshall-Lerner condition is satisfied most of the times. I hope this answers your question. |
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Hey hii On Jun 17, 2015 3:02 PM, "dhruv [via Discussion forum]" <[hidden email]> wrote:
If, E = domestic currency in terms of foreign currency, and ... [show rest of quote] |
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I studied from Blanchard.
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Yes i found it . Its chapter 19 On Jun 18, 2015 10:30 AM, "dhruv [via Discussion forum]" <[hidden email]> wrote:
I studied from Blanchard. |
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