The asymmetric effects of exchange rate volatility on US–Pakistan trade flows: new evidence from nonlinear ARDL approach

2021 ◽  
Author(s):  
Javed Iqbal ◽  
Sabahat Aziz ◽  
Misbah Nosheen
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Volatility ◽  
Trade Flows ◽  
Asymmetric Effects ◽  
Nonlinear Ardl ◽  
Ardl Approach ◽  
New Evidence

Nonlinear ARDL approach, asymmetric effects and the J-curve

2015 ◽  
Vol 42 (3) ◽  
pp. 519-530 ◽  
Author(s):  
Mohsen Bahmani-Oskooee ◽  
Hadise Fariditavana
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Trade Flows ◽  
Balance Model ◽  
Content Type ◽  
Asymmetric Effects ◽  
Currency Depreciation ◽  
Nonlinear Ardl ◽  
J Curve ◽  
Ardl Approach

Purpose – Previous research that investigated the effects of currency depreciation on the trade balance assumed that the adjustment of all variables in a given model is in linear fashion. The authors wonder if introduction of nonlinearity in the adjustment of some variables such as the exchange rate can shed additional light on evidence of the J-curve. The new approach also allows to test whether exchange rate changes have symmetric or asymmetric effects on the trade balance. Estimates of a trade balance model for Canada, China, Japan, and the USA reveal that the effects are indeed asymmetric. The paper aims to discuss these issues. Design/methodology/approach – The methodology is based on linear and nonlinear ARDL approach. Findings – When nonlinearity is introduced into testing approach for the J-curve, more evidence is found in support of the J-curve. Research limitations/implications – The models are estimated using aggregate trade flows of each country with the rest of the world, hence they suffer from aggregation bias. Using trade flows at bilateral level and at commodity level are highly recommended for future research. Originality/value – This is the first paper that applies nonlinear ARDL approach to test the short-run and long-run effects of currency depreciation on the trade balance.

Exchange rate volatility and Turkish–German commodity trade: an asymmetry analysis

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohsen Bahmani-Oskooee ◽  
Huseyin Karamelikli
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Volatility ◽  
Trade Flows ◽  
Commodity Trade ◽  
Content Type ◽  
Asymmetric Effects ◽  
Long Run ◽  
Ardl Approach ◽  
Short Run ◽  
Turkish German

Purpose The purpose of this paper is to show that in some industries the linear model may not reveal any significance link between exchange rate volatility and trade flows but once nonlinear adjustment of exchange rate volatility is introduced, the nonlinear model reveals significant link. Design/methodology/approach This paper uses the linear ARDL approach of Pesaran et al. (2001) and the nonlinear ARDL approach of Shin et al. (2014) to assess asymmetric effects of exchange rate volatility on trade flows between Germany and Turkey. Findings This paper consider the experiences of 75 2-digit industries that trade between Turkey and Germany. When the study assumed the effects of volatility to be symmetric, the study found short-run effects in 31 (30) Turkish (German) exporting industries that lasted into the long run in only 10 (13) Turkish (German) exporting industries. However, when the study assumed asymmetric effects and relied upon a nonlinear model, the study found short-run asymmetric effects of volatility on exports of 55 (56) Turkish (German) industries. Short-run asymmetric effects lasted into long-run asymmetric effects in 10 (25) Turkish (German) exporting industries. All in all, we found that almost 25% of trade is hurt by exchange rate volatility. Originality/value This is the first paper that assesses the possibility of asymmetric effects of exchange rate volatility on German–Turkish commodity trade.

Asymmetric Exchange Rate Effects on Cross-Border Freight Flows between the United States and Canada

2020 ◽  
Vol 2674 (4) ◽  
pp. 348-361
Author(s):  
Junwook Chi
Keyword(s):  
Exchange Rate ◽  
Linear Models ◽  
Bilateral Trade ◽  
Nonlinear Models ◽  
Exchange Rate Volatility ◽  
The United States ◽  
Trade Flows ◽  
Asymmetric Effects ◽  
Cross Border ◽  
Long Run

This paper investigates possible asymmetric influences of the exchange rate on cross-border freight flows between the U.S.A. and Canada. Linear and nonlinear autoregressive distributed lag models are used to test for the existence of long-run asymmetric effects of 1) currency appreciation and depreciation and 2) exchange rate volatility changes on trade flows by truck, rail, air, vessel, and pipeline. This paper provides evidence that both currency value and exchange rate volatility affect the U.S.–Canada freight flows in an asymmetric manner. The long-run results of the nonlinear models show that exchange rate is found to be significantly associated with the bilateral trade flows between the U.S.A. and Canada. Exchange rate volatility tends to be significantly associated with trade flows in the nonlinear models, while its effects are insignificant in most cases in the linear models. These findings suggest that the conventional linear specification may mislead the asymmetric effects of exchange rate uncertainty on cross-border freight flows. It is also found that exchange rate sensitivities of U.S.–Canada trade flows by transport mode can differ significantly from those of aggregate trade flows. The information derived from disaggregate trade data can be useful for traders and shippers to develop a long-term strategic plan for infrastructure investment and service expansion.

Asymmetric Impact of Exchange Rate Volatility on Commodity Trade Between Pakistan and China

2020 ◽  
pp. 097215092091628
Author(s):  
Mohsen Bahmani-Oskooee ◽  
Ahmed Usman ◽  
Sana Ullah
Keyword(s):  
Exchange Rate ◽  
Linear Models ◽  
Exchange Rate Volatility ◽  
Trade Flows ◽  
Annual Data ◽  
Asymmetric Effects ◽  
Long Run ◽  
Short Run ◽  
Asymmetric Impact ◽  
Almost All

China is the largest trading partner of Pakistan. Therefore, it is very important to consider the trade flows between Pakistan and China and their response to rupee–yuan volatility. Previous research assumed that response of trade flows to measure of volatility is symmetric. In this study, our basic objective is to check whether the trade flows respond to volatility in a symmetric or asymmetric manner. Annual data over the period 1980–2018 for 14 Pakistani industries exporting to and 34 industries importing from China are analyzed. We find short-run asymmetric effects of exchange rate volatility in almost all industries that last into long-run asymmetric effects in 40–50 per cent of industries. Non-linear models yielded more significant effects of volatility than the traditional linear models.

The Asymmetric Effects of Exchange Rate Changes on the Trade Balance of Singapore

2017 ◽  
Vol 17 (4) ◽  
pp. 20170055
Author(s):  
Mohsen Bahmani-Oskooee ◽  
Hanafiah Harvey
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Bilateral Trade ◽  
Research Direction ◽  
Asymmetric Effects ◽  
Nonlinear Ardl ◽  
Long Run ◽  
Ardl Approach ◽  
Short Run ◽  
Exchange Rate Changes

Previous studies that tested the short-run and long-run effects of exchange rate changes on trade balances assumed that the effects are symmetric. The more recent research direction has now changed to investigating the possibility of asymmetric effects. In this paper, we assess the short-run and long-run effects of exchange rate changes on the bilateral trade balances of Singapore with her 11 partners. By applying the nonlinear ARDL approach, which separates appreciations from depreciations, we find that exchange rate changes have short-run asymmetric effects in most models. The short-run effects, however, lasted into the long run in a few models. In the long run, while depreciation improves Singapore’s trade balance with the U.S., it hurts it with Malaysia and China. These three partners account for almost 50 % of Singapore’s trade.

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