The dynamics of the U.S. trade balance and real exchange rate: The J curve and trade costs?

Objective - This paper aims to examine the relationship between exchange rates and trade balance in Morocco, to investigate whether the Marshall-Lerner condition and J-curve exist. Methodology/Technique - This paper attempts to identify the relationship between the real exchange rate and trade balance in Morocco between 2000 an 2015. Findings - Historically, exchange rates have had a strong impact on foreign trade in Morocco. Novelty - This study concludes that the fluctuation of exchange rates has no notable impact on the rate of foreign trade. Type of Paper: Empirical. Keywords: Exchange Rates; Trade Balance; Exports; Imports; Morocco. JEL Classification: D51, D59.

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Investigating the Relationship between Trade Balance and the Exchange Rate: The Case of Laos’ Trade with Thailand

Global Business Review ◽

10.1177/0972150917713869 ◽

2018 ◽

Vol 19 (3) ◽

pp. 590-603 ◽

Cited By ~ 1

Author(s):

Phouphet Kyophilavong ◽

Muhammad Shahbaz ◽

Ijaz Ur Rehman ◽

Somchith Souksavath ◽

Sengchanh Chanthasene

Keyword(s):

Economic Growth ◽

Exchange Rate ◽

Trade Policy ◽

Real Exchange Rate ◽

Trade Balance ◽

The Real ◽

J Curve ◽

The Exchange Rate ◽

The Relationship

We investigate the nexus between Laos’ trade balance and its real exchange rate with Thailand. We apply the combined cointegration approach and find that the trade balance and the real exchange rate have cointegration. The devaluation of Laos’ Kip improves the trade balance, but there is no evidence of the J-curve phenomenon. Laos’s economic growth causes its trade balance to deteriorate. A rise in Thai income increases the trade balance of Laos. This study presents new insights for policymakers who seek to sustain trade with Thailand by designing a comprehensive trade policy.

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Real exchange rate and trade balance of Pakistan: an empirical analysis

Jinnah Business Review ◽

10.53369/otup9269 ◽

2013 ◽

Vol 01 (01) ◽

pp. 44-51

Author(s):

Muhammad Bilal Saeed ◽

Ijaz Hussain

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

Trade Balance ◽

Short Term ◽

Correction Model ◽

J Curve ◽

Short Run ◽

The Relationship ◽

Balance Error

This study evaluates the relationship between real exchange rate and trade balance prevailed in Pakistan during the 1985-2010 period. Engel Granger residual based and Johansen Juselius tests have been used to inquire into the long term connection between exchange rate and trade balance. Error correction model is then employed to study the short term connection. It has been discovered that there exists a connection between real exchange rate and trade balance in long as well as short run. The evidences set forth lead to a decisive conclusion that Marshall Lerner Condition and J curve effect both hold in case of Pakistan.

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The Effect of Real Exchange Rate Changes on External Trade Balance in Sudan: Testing J-Curve Hypothesis

Nile Journal of Business and Economics ◽

10.20321/nilejbe.v6i16.01 ◽

2020 ◽

Vol 6 (16) ◽

pp. 3-23

Author(s):

Ahmed Abdu Allah IBRAHIM ◽

◽

Mohamed Sharif BASHIR ◽

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

Granger Causality ◽

Trade Balance ◽

Granger Causality Test ◽

Additional Contribution ◽

External Trade ◽

Causality Test ◽

J Curve ◽

The Impact

The current research article analyzes the impact of changes in real exchange rate upon external trade balance of Sudan during the period 1978-2017. It employs Autoregressive Distributed Lag (ARDL) approach, impulse response functions and Granger causality test. The empirical findings indicate that exchange rate devaluations have no impact on the merchandize trade balance, thus evidence in favor of the J-curve pattern was not found. Granger causality test runs one-way from trade ratio to real exchange rate and not the other way. Thus, the results can be considered as an additional contribution to evidence stated in literature that focused a vibrant range of economies. These findings are appropriate for policy making in Sudan as well as in various developing countries since the focal point is major trade balance deficit.

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The Real Exchange Rate, the Ghanaian Trade Balance, and the J-curve

Journal of African Business ◽

10.1080/15228916.2017.1315706 ◽

2017 ◽

Vol 18 (3) ◽

pp. 380-392 ◽

Cited By ~ 7

Author(s):

Bernard Njindan Iyke ◽

Sin-Yu Ho

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

Trade Balance ◽

The Real ◽

J Curve

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(Asymmetric) Trade Costs, Real Exchange Rate Hedging, and Equity Home Bias in a Multi-Country Model

SSRN Electronic Journal ◽

10.2139/ssrn.3039103 ◽

2017 ◽

Author(s):

Ju Hyun Pyun

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

Home Bias ◽

Trade Costs ◽

Equity Home Bias

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The Effect of Real Exchange Rate on Trade Balance in a Resource-Rich Economy: The Case of Mongolia

Foreign Trade Review ◽

10.1177/0015732518797184 ◽

2018 ◽

Vol 53 (4) ◽

pp. 211-224 ◽

Cited By ~ 2

Author(s):

Gan-Ochir Doojav

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

Trade Balance ◽

Developing Economies ◽

Jel Classification ◽

Vector Error Correction ◽

Vector Error ◽

Long Run ◽

Short Run ◽

Exchange Rate Depreciation

For resource-rich developing economies, the effect of real exchange rate depreciation on trade balance may differ from the standard findings depending on country specific characteristics. This article employs vector error correction model to examine the effect of real exchange rate on trade balance in Mongolia, a resource-rich developing country. Empirical results show that exchange rate depreciation improves trade balance in both short and long run. In particular, the well-known Marshall–Lerner condition holds in the long run; however, there is no evidence of the classic J-curve effects in the short run. The results suggest that the exchange rate flexibility may help to deal effectively with current account deficits and exchange rate risk. JEL Classification: C32, C51, F14, F32

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Research On Monetary Neutrality: Evidence From Exchange Rate And Trade Balance Of G-7 Countries

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v24i2.1351 ◽

2011 ◽

Vol 24 (2) ◽

Cited By ~ 1

Author(s):

Doh-Khul Kim

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

Trade Balance ◽

Monetary Shocks ◽

Font Size ◽

Long Run ◽

Short Period ◽

Short Run ◽

Monetary Neutrality ◽

Nominal Shocks

According to a recent paper by Fisher and Huh (2002), in contrast to a long-run neutrality hypothesis, nominal shocks have long-run effects on a country’s real exchange rate and trade balance. However employing a similar method (VAR) with identical restrictions (long-run neutrality and short-run recursive hypotheses), this paper shows that the effects on the real exchange rate are much shorter in this G-7 country study than what Fisher and Huh (2002) contend. Further, the trade balance improves for a short period of time, from which it can conclude there is a shorter existence of the depreciation effect in response to expansionary monetary shocks, which supports the long-run neutrality hypothesis in an open macroeconomic framework.

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