Thesis (M.Sc.) - Cairo University - Faculty of Economics and Political Science - Department of Economics

The impact of the exchange rate devaluation on the trade balance has been the focus of many economist{u2019}s circles in the last few decades as many emerging economies used this macroeconomic tool to drive an export-led growth model. This study seeks to examine the impact of currency devaluation on the trade balance in a number of selected BRICS economies using time series analysis for the period 2000 {u2013} 2016 with quarterly frequencies to examine the dynamic relationship between the trade balance and the real effective exchange rate (REER) for three selected countries from the BRICS; namely China, Brazil and Russia. The Johanson co-integration technique and the vector error correction model (VECM) are used to examine the short run and long run relationship. Finally, generalized impulse response function and variance decomposition is created to examine the existence of a J-curve phenomenon in the countries used as case studies. A long run association was found between the trade balance and the real effective exchange rate in the three cases. The study detected a J-curve pattern only in the case of Russia which shows that currency devaluation cause an initial deterioration in the trade balance in the short run followed by an improvement in the long run

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