Marshall- Lerner Condition And Current Account Sustainability

In this chapter, I present an analytical reformulation of the Marshall-Lerner condition under the assumption that the independence of the GDP from the exchange rate cannot be postulated in open economies in which the foreign trade flow/GDP ratio is high. This paper attempts to analyze how, in open economies in which the export and import flow/GDP ratio is very high, independence between the GDP and the exchange rate is not a plausible assumption, so the traditional version of the Marshall-Lerner condition is not sustained.