scholarly journals Exchange Rate and Trade in Services Nexus in Nigeria: A Non-Linear ARDL Approach

2022 ◽  
Vol 8 (1) ◽  
pp. 465-482
Author(s):  
Nathan Audu ◽  
Titus Obiezue
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rates ◽  
Trade In Services ◽  
Jel Codes ◽  
Nonlinear Ardl ◽  
Ardl Approach ◽  
Nonlinear Ardl Model ◽  
Rate Adjustment ◽  
Oil Export ◽  
Asymmetric Cointegration

A nonlinear ARDL model is employed to investigate the asymmetric drivers of non-oil trade in services between Nigeria and Netherlands. A significant number of past studies have concentrated their attention on the elasticity of trade in services to real exchange rates and income as well as on non-oil export, total export trade or import, yet none have delve into asymmetric relationship. This study aims to fills this void. Our result shows that the effects of exchange rate variations have both positive and negative displays with more negative asymmetry. This provides further insights in the nature of service asymmetries. (JEL Codes: C22, D43, E31, L71, Q41) Keywords: asymmetric cointegration, exchange rate adjustment, disaggregated, services

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.

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