The Dynamics of the Trade Balance: An Empirical Investigation of the Marshall-Lerner Condition and J-curve Hypothesis in Trinidad and Tobago (Working Papers, WP05/2021)

This paper investigates whether an exchange rate depreciation would improve the trade balance for Trinidad and Tobago, within the theoretical underpinnings of the Marshall-Lerner (ML) condition and the J-curve Hypothesis, using data from 1991 to 2020. The ML condition posits that improvement in a country’s trade balance depends on the combined responsiveness of demand for imports and exports, in response to a currency depreciation.