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Lerner’s

Marshall-Lerner condition

noun

(economics) The condition that an exchange rate devaluation or depreciation will only cause a balance of trade improvement if the absolute sum of the long run export and import demand elasticities is equal to, or greater than 1.

The Marshall-Lerner condition states that a depreciation of the domestic currency will improve the trade balance if the sum of the price elasticities of demand for exports and imports is greater than one.

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