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A) Explain each of the following theories: i) Elasticity Approach to the BOP ii) Absorption...

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A) Explain each of the following theories: i) Elasticity Approach to the BOP ii) Absorption Approach to the BOP iii) Intertemporal Approach to the BOP b) Using appropriate diagram, explain the J-curve phenomenon appears in the exchange rate-trad; balance relationship. c) Briefly comment on the following empirical results. ln(X/M)_Malaysia = 0.78 - 1 011n Y + 2.22 1nY' + 0.67 1n REX_RM/Ymm se (0.31) (0.25) (0.90) (0.22) R^2 =0.65 where In denotes the natural logarithm, (X/M)Malaysia is Malaysia-China export-import ratio, Y is the real Malaysian income, Y* is the China income, REX is the real exchange of RM/Yuan

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