Trade War and the Balanced Trade-Monetary Theory

Publish Year: 1400
نوع سند: مقاله ژورنالی
زبان: English
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شناسه ملی سند علمی:

JR_JMMF-1-2_007

تاریخ نمایه سازی: 18 بهمن 1400

Abstract:

One of the longest-lasting controversies in the international macroeconomic literature is the purchasing power parity theory. It is the most controversial subject that has been tested with various econometric models in different timeframes and geographic data sets. It is a common assumption used regarding the exchange rate and the validity of the Law of One Price. The present article aimed to present a new model to estimate the fair value of exchange rate which is one of the most critical factors in trade balance among countries, based on balanced trade-monetary theory by assessing the under or over-valuation of currencies. We can assume that a country with a strong economy should have strong money and vice versa. The results showed undervaluation of the dollar versus Yuan, Pound and Yen by ۱.۴۱, ۱.۱۴۹, and ۱.۱۲۶ times, respectively in ۲۰۱۸. Therefore, among the U.K., China, and Japan, Japan and the U.K. had a better trade balance with the U.S. than China

Keywords:

GDP per-capita , balanced trade ratio , Balanced Trade-Monetary Theory , Purchasing Power Parity (PPP) , Consumer Price Index (CPI)

Authors

Saeid Tajdini

Postdoc of Finance, Faculty of Economics, University of Tehran, Tehran, Iran

Amir Hamooni

Ph.D. candidate in Economics Department, University of Tehran, Iran

Jamal Maghsoudi

Master of Science in Financial Management, University of Tehran, Tehran, Iran

Farzad Jafari

Department of management, University of Tehran, Tehran, Iran

Majid Lotfi Ghahroud

Department of Management, Faculty of financial management, University of Tehran, Tehran, Iran