scholarly journals Exchange rate and trade balance: J-curve effect

2010 ◽  
Vol 57 (1) ◽  
pp. 23-41 ◽  
Author(s):  
Pavle Petrovic ◽  
Mirjana Gligoric
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Impulse Response Functions ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
J Curve ◽  
Curve Effect ◽  
Short Run ◽  
Current Account Adjustments

This paper shows that exchange rate depreciation in Serbia improves trade balance in the long run, while giving rise to a J-curve effect in the short run. These results add to the already existent empirical evidence for a diverse set of other economies. Both Johansen's and autoregressive distributed lag approach are respectively used giving similar long-run estimates showing that real depreciation improves trade balance. Corresponding errorcorrection models as well as impulse response functions indicate that, following currency depreciation, trade balance first deteriorates before it later improves, i.e. exhibiting the J-curve pattern. These results are relevant for policy making both in Serbia and in a number of other emerging Europe countries as they face major current account adjustments after BoP crises of 2009.

scholarly journals An Empirical Time Series Econometric Study of the J-curve Effect of Exchange Rate in Trade Balance between China and the US

2020 ◽  
pp. 35-46
Author(s):  
Ming-Lu Wu
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Unit Root Test ◽  
Real Effective Exchange Rate ◽  
Quarterly Data ◽  
Long Run ◽  
J Curve ◽  
The Us ◽  
Curve Effect ◽  
Short Run

Background and Aims: With the tensed relationship between China and the US, investigating the trade relationship between the two big countries has received more attention than before. This paper is just towards that direction to empirically examine the relationship between China’s real effective exchange rate (REER) and trade balance with the US in both the long-run and short-run, which may exhibit the J-curve effect – currency depreciation deteriorates trade balance in the short-run but promotes trade balance in the long-run – in China’s international trade with the US. Data and Methodology: Quarterly data on China’s REER, trade balance and gross domestic product (GDP, for income) and the US GDP from 2001 to 2017 are retrieved from relevant official websites for the current study. Unit-root test is first conducted on each modeling variable and its first difference to examine the stationarity of the variables. Autoregressive distributed lag (ARDL) approach with error-correction modeling (ECM) cointegration is then adopted to test the popular hypothesis of J-curve effect using the available quarterly data. Results and Conclusion: The modeling results reject the J-curve effect in the short-run but show a long-lasting positive effect of Chinese yuan’s depreciation in China’s trade balance with the US. Also, the US GDP has a positive and much stronger effect than Chinese GDP on China’s trade balance. As such, it is suggested that China should maintain a good relationship with the US and a stable exchange rate for long-run trade balance and economic growth at an appropriate level or rate.

Turkish tourism, exchange rates and income

2016 ◽  
Vol 23 (1) ◽  
pp. 66-77 ◽  
Author(s):  
Gokhan H. Akay ◽  
Atilla Cifter ◽  
Ozdemir Teke
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Significant Variable ◽  
Correction Model ◽  
Long Run ◽  
J Curve ◽  
Curve Effect ◽  
Short Run ◽  
The Exchange Rate ◽  
Maximum Likelihood Technique

This study examines the effects of the exchange rate and income on Turkish tourism trade balance (TB) using quarterly data for the period 1998–2011. The authors use tourism trade-weighted exchange rate indices and foreign income derived from country-based tourism trade. They employ Johansen’s maximum likelihood technique to estimate the long-run effects of the exchange rate and income on tourism, and employ an error correction model to analyse the short-run effects. The empirical results suggest that income is the most significant variable in explaining tourism TB in the long run. The exchange rate and foreign income positively affect the TB, while domestic income negatively influences it. In the short-run, however, domestic income is the only significant factor. The authors also find no evidence of a J-curve effect in the Turkish tourism TB. These findings are robust to using nominal values.

scholarly journals The Impact of Exchange Rate on Market Fundamentals: A Case Study of J-curve Effect in Vietnam

2017 ◽  
Vol 9 (1) ◽  
pp. 45 ◽  
Author(s):  
Nguyen Quang My ◽  
Mustafa Sayim ◽  
Hamid Rahman
Keyword(s):  
Exchange Rate ◽  
Error Correction ◽  
Trade Balance ◽  
Short Term ◽  
Correction Model ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
J Curve ◽  
Curve Effect

This study examines if there is an equilibrium relationship between gross domestic product (GDP), exchange rate fluctuation and trade balance in long-term and short-term in Vietnam. The results show that the short-term and long-term exchange rate fluctuations impact the trade balance in Vietnam; both ARDL (Autoregressive Distributed Lag) and ECM (Error Correction Model) methodologies implied that exchange rate has a statistically negatively impact on the trade balance. Particularly, Autoregressive distributed lag (ARDL) utilized to test the long -term impact, shows the trade balance deficit becomes worse when the REER (real effective exchange rate) increases. ECM (Error Correction Model) equation based on the long-term cointegration equation and impulse response, reveals that the domestic currency devaluation could not improve the trade balance, indicating that the J-curve effect does not hold on the dong, the currency of Vietnam.

scholarly journals The exchange rate, the trade balance and the J-curve effect in South Africa

2014 ◽  
Vol 17 (5) ◽  
pp. 601-608 ◽  
Author(s):  
Eric Schaling ◽  
Alain Kabundi
Keyword(s):  
South Africa ◽  
Exchange Rate ◽  
Trade Balance ◽  
Real Effective Exchange Rate ◽  
Long Run ◽  
J Curve ◽  
Curve Effect ◽  
Effective Exchange ◽  
Short Run ◽  
Effective Exchange Rate

We find that for the period 1994-2011 there is robust statistical evidence that, in the long run, net exports are boosted by a weaker real effective exchange rate. However, this effect does not hold in the short run. We thus find empirical evidence supporting the J-curve effect for South Africa.

scholarly journals The Determinants of Pakistan’s Trade Balance: An ARDL Cointegration Approach

2010 ◽  
Vol 15 (1) ◽  
pp. 1-26 ◽  
Author(s):  
Waliullah Waliullah ◽  
Mehmood Khan Kakar ◽  
Rehmatullah Kakar ◽  
Wakeel Khan
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
Money Supply ◽  
Trade Balance ◽  
Exchange Rate Regime ◽  
Annual Data ◽  
Impulse Response Functions ◽  
Bounds Testing ◽  
Distributed Lag ◽  
Long Run

This article is an attempt to examine the short and long-run relationship between the trade balance, income, money supply, and real exchange rate in the case of Pakistan’s economy. Income and money variables are included in the model in order to examine the monetary and absorption approaches to the balance of payments, while the real exchange rate is used to evaluate the conventional approach of elasticities (Marshall Lerner condition). The bounds testing approach to cointegration and error correction models, developed within an autoregressive distributed lag (ARDL) framework is applied to annual data for the period 1970 to 2005 in order to investigate whether a long-run equilibrium relationship exists between the trade balance and its determinants. Additionally, variance decompositions (VDCs) and impulse response functions (IRFs) are used to draw further inferences. The result of the bounds test indicates that there is a stable long-run relationship between the trade balance and income, money supply, and exchange rate variables. The estimated results show that exchange rate depreciation is positively related to the trade balance in the long and short run, consistent with the Marshall Lerner condition. The results provide strong evidence that money supply and income play a strong role in determining the behavior of the trade balance. The exchange rate regime can help improve the trade balance but will have a weaker influence than growth and monetary policy.

scholarly journals DYNAMIC EFFECTS OF REMITTANCES ON EXTERNAL RESERVES IN NIGERIA: THE ROLE OF INFLATION AND STRUCTURAL BREAKS

2019 ◽  
Vol 13 (1) ◽  
pp. 119-141
Author(s):  
E. A. OLUBIYI ◽  
A. RAHEEM ◽  
A. A. ADEMOKOYA
Keyword(s):  
Exchange Rate ◽  
Structural Breaks ◽  
Flexible Exchange Rate ◽  
Jel Classification ◽  
Additional Information ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Floating Exchange Rate ◽  
Short Run

This study provides additional information about the drivers of external reserves in Nigeria.  The result using Autoregressive Distributed Lag (ARDL) model estimation approach for the period 1980-2015 shows that remittances, among other macroeconomic variables, increased external reserves in the short run but weakens it in the long run. Remittances depletes external reserves through its effect on inflation rate and the nonsterilized intervention of the Central Bank.  Furthermore, regime shift to relatively floating exchange rate causes remittances to increase reserves.  From the foregoing, it is important for the authorities to continue operating relatively flexible exchange rate, and curtail excessive spending of remittances.   Keywords: , , , , . JEL Classification: F31, F24, C22, F31  

FAKTOR-FAKTOR YANG MEMPENGARUHI NILAI IMPOR KEDELAI INDONESIA

2014 ◽  
Vol 8 (1) ◽  
pp. 117-138 ◽  
Author(s):  
Aziz Muslim
Keyword(s):  
Time Series ◽  
Exchange Rate ◽  
Soybean Oil ◽  
Secondary Data ◽  
Cointegration Analysis ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Government Role ◽  
Short Run

Kajian ini bertujuan untuk menentukan faktor-faktor yang mempengaruhi impor kedelai Indonesia. Data yang digunakan adalah data sekunder berbentuk time series, diolah dan dianalisis dengan metode estimasi dan kointegrasi Autoregressive Distributed Lag (ARDL). Hasil penelitian menunjukkan bahwa faktor-faktor yang mempengaruhi impor kedelai Indonesia dalam jangka pendek adalah impor kedelai sebelumnya, harga kedelai USA, harga minyak kedelai Argentina, dan nilai tukar Rupiah. Dalam jangka panjang faktor yang berpengaruh adalah harga minyak kedelai Argentina, PDB Indonesia, dan nilai tukar Rupiah. Kajian ini merekomendasikan bahwa mekanisme pengamanan stok kedelai maupun minyak kedelai bermanfaat untuk menjaga ketersediaan pangan dalam negeri. Peran aktif pemerintah dalam mengamankan stok kedelai nasional serta pengumpulan data-data tentang impor kedelai merupakan tuntutan yang mendesak. Untuk menjaga kestabilan harga dan pasokan kedelai dalam negeri perlu ada upaya untuk mendiversifikasi negara asal impor. The aim of this study is to determine the factors that affect Indonesia’s imports of soybean. The study utilized time series secondary data and Autoregressive Distributed Lag (ARDL) cointegration analysis. The results reveal that in the short run Indonesia’s import of soybean are influenced by Indonesia's soybean imports in the previous year, price of USA’s soybean, Argentina’s soybean oil price, and the Rupiah exchange rate. In the long run Indonesia’s imports of soybean are influenced by Argentina’s soybean oil, Indonesia GDP, and the Rupiah exchange rate. This study recommends that mechanism to maintain soybean stocks demanded is useful for food security.Therefore Government role is important in providing the accurate data on soybean stock, and diversification of the country of origin is crucial to maintain price stability and supply continuity in the country

Dynamic Effects of Exchange Rate Movements on Productivity Levels: New Evidence From Nigeria Based on NARDL

2021 ◽  
pp. 245513332110507
Author(s):  
Emmanuel Uche ◽  
Sunday Ikedinobi Nwamiri
Keyword(s):  
Exchange Rate ◽  
Output Growth ◽  
Distributed Lag ◽  
Dynamic Relationship ◽  
Autoregressive Distributed Lag ◽  
Long Run ◽  
Exchange Rate Movements ◽  
Short Run ◽  
Pass Through ◽  
Exchange Rate Depreciation

The dynamic relationship between exchange rate movements (appreciation and depreciation) and macroeconomic fundamentals had preoccupied the minds of researchers across the globe. Consequently, extensive research works have been conducted to unravel the puzzle; however, the findings remain inconclusive. The inconclusiveness of these researches may not be unconnected with the choice of model, the omission of key variables and erroneous assumption of symmetric interrelationships of the variables. To mitigate such error and fill the observed research gaps, this study leveraged on the non-linear autoregressive distributed lag to trace the possible asymmetric pass-through of the exchange rate to output growth in Nigeria. The study made use of monthly time series for the period 2000M1–2018M12 for empirical estimations. The empirical findings reveal an asymmetric pass-through from exchange rate to productivity. Exchange rate depreciation led to output retardation in the short run, but neither appreciation nor depreciation of the exchange affected output in the long run. The findings highlight that exchange rate depreciation of the local currency does not improve the country’s productivity. This reveals a disconnection and misalignment between exchange and productivity in Nigeria. The findings call for proper alignment of the Naira exchange rate with the U.S. dollar for improved productivity in the economy.

scholarly journals Pakistan-EU Commodity Trade: Is there Evidence of J-Curve Effect?

2017 ◽  
Vol 17 (2) ◽  
pp. 20160067 ◽  
Author(s):  
Mohsen Bahmani-Oskooee ◽  
Javed Iqbal ◽  
Muhammad Muzammil
Keyword(s):  
Trade Balance ◽  
Bilateral Trade ◽  
Commodity Trade ◽  
Trade Data ◽  
Currency Depreciation ◽  
Long Run ◽  
J Curve ◽  
Curve Effect ◽  
Short Run ◽  
Trade Partners

In investigating the short run and the long run impact of currency depreciation on Pakistan’s trade balance, previous studies have either relied on using bilateral trade data between Pakistan and her trade partners or between Pakistan and the rest of the world and have found not much support for successful depreciation. Suspecting that these studies may suffer from aggregation bias, in this paper we use disaggregated trade data at commodity level from 77 industries that trade between Pakistan and EU. While we find short-run significant effects in 22 industries, these effects do not last into the long run in most industries. Most of the affected industries are found to be small, as measured by their trade shares.

scholarly journals FENOMENA KURVA J PADA NERACA PERDAGANGAN INDONESIA DENGAN ENAM NEGARA MITRA DAGANG UTAMA

2018 ◽  
Vol 1 (2) ◽  
pp. 10
Author(s):  
Anggraeni Tri Hapsari ◽  
Akhmad Syakir Kurnia
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Bilateral Trade ◽  
Long Run ◽  
J Curve ◽  
Bilateral Trade Balance ◽  
Trading Partners ◽  
Short Run ◽  
Balance Of Trade ◽  
The Exchange Rate

Whether a J curve phenomenon exists or not on the balance of trade has been an interest for empirical investigation in international economics. The phenomenon is typically associated with the response of the balance of trade to the exchange rate dynamics. Since a country has different trade features with different trading partners, the trade balances adjustment to the exchange rate dynamics should be seen as a head to head phenomenon. This paper investigates the effect of real effective exchange rate (REER) on the bilateral trade balance between Indonesia and its six major trading partners, namely Japan, China, Singapore, United States, South Korea and India on a quarterly basis over the period 1995.1 to 2013.4. The short run and the long run effect of the REER on the balance of trade is expected to be captured using error correction model (ECM) and vector error correction model (VECM). Subsequently, impulse response function is used to trace out the behavior of the bilateral trade balance in response to the REER shock whereas forecast error variance decomposition (FEVD) is used to decay the effect of innovation variables in the system. The result indicates that in the long run a J curve phenomenon appears on the bilateral trade balance between Indonesia and Japan, China, Singapore as well as South Korea. In the short run, a J curve phenomenon is seen on the bilateral trade balance between Indonesia and China as well as Singapore. This confirms that a J curve is a head to head phenomenon that has correlation with the trade features. Thus, the correction mechanism to the trade balance in response to the exchange rate shock (i.e. exchange rate market intervention) should count trade features as a consideration

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