Assume that initially nominal exchange rate is E1=4 ($1 = ±4) and domestic (Turkey) inflation rate is nTR=10% percent while the US inflation rate is nUS*=0%. If export value of Turkey equals t 200 billion and it's import is $80 billion. Initially Turkey NX (net export) would display t billion deficit. lf the nominal exchange rate increases suddenly from E1=4 to E2=5,5 while the price levels are still fixed (at the first step of J Curve) NX would be t billion deficit in short run. If the real exchange rate elasticity of export is 0,4 and real exchange rate elasticity of import is -0,4. NX would converge to t billion deficit in long run.
Assume that initially nominal exchange rate is E1=4 ($1 = ±4) and domestic (Turkey) inflation rate is nTR=10% percent while the US inflation rate is nUS*=0%. If export value of Turkey equals t 200 billion and it's import is $80 billion. Initially Turkey NX (net export) would display t billion deficit. lf the nominal exchange rate increases suddenly from E1=4 to E2=5,5 while the price levels are still fixed (at the first step of J Curve) NX would be t billion deficit in short run. If the real exchange rate elasticity of export is 0,4 and real exchange rate elasticity of import is -0,4. NX would converge to t billion deficit in long run.
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter13: Open-economy Macroeconomics: Basic Concepts
Section: Chapter Questions
Problem 9PA
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Transcribed Image Text:Assume that initially nominal exchange rate is E1=4 ($1 = ±4) and domestic (Turkey) inflation rate is TTR=10% percent while the US inflation rate is tUS*=0%. If
%3D
export value of Turkey equals ± 200 billion and it's import is $80 billion. Initially Turkey NX (net export) would display t
billion deficit. If
the nominal exchange rate increases suddenly from E1=4 to E2=5,5 while the price levels are still fixed (at the first step of J Curve) NX would be t
billion deficit in short run. If the real exchange rate elasticity of export is 0,4 and real exchange rate elasticity of import is -0,4. NX
would converge to t
billion deficit in long run.
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