THE U.S. TRADE BALANCE WITH PARTNERS FROM DEVELOPING WORLD: AN ASYMMETRY ANALYSIS OF THE J-CURVE EFFECT

This paper aims at analysing the relation between real trade balance and foreign demand in the case of a small opened economy, which highly depends upon the rest of the world for productive capital. Theoretical analysis allows us to bring forth a kind of “J-curve” effect. Indeed, when foreign demand for domestic goods increases, the country is to import in a first time in order to improve its productive capacities, resulting in worsening trade balance. However, in a second time, once the cumulated capital inventory became sufficient, the trade balance improves under the pressure of domestic exports high growth. The empirical analysis based on Australia from 1982 (1) to 2001 (1) supports this theory. We show there are negative short term and positive long term elasticities.

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The J-Curve Effect on the Trade Balance in Armenia

International Journal of Economics Finance and Management Sciences ◽

10.11648/j.ijefm.20150303.23 ◽

2015 ◽

Vol 3 (3) ◽

pp. 270

Author(s):

Gevorg Grigoryan

Keyword(s):

Trade Balance ◽

J Curve ◽

Curve Effect

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

Journal of International Economics ◽

10.1016/j.jinteco.2021.103511 ◽

2021 ◽

pp. 103511

Author(s):

George Alessandria ◽

Horag Choi

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

Trade Balance ◽

Trade Costs ◽

J Curve ◽

The U.S

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

Global Economy Journal ◽

10.1515/gej-2016-0067 ◽

2017 ◽

Vol 17 (2) ◽

pp. 20160067 ◽

Cited By ~ 1

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.

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Empirical Analysis of the Determinants of Trade Balance in Post-liberalization Ghana

Foreign Trade Review ◽

10.1177/0015732519851632 ◽

2019 ◽

Vol 54 (3) ◽

pp. 177-205 ◽

Cited By ~ 1

Author(s):

Linda Akoto ◽

Daniel Sakyi

Keyword(s):

Money Supply ◽

Trade Balance ◽

Household Consumption ◽

Variance Decomposition ◽

Consumption Expenditure ◽

Government Consumption ◽

J Curve ◽

Curve Effect ◽

Domestic Prices ◽

Short Run

This study investigates the determinants of trade balance in post-liberalization Ghana, covering the period 1984–2015. Specifically, we test the validity of the Marshall-Lerner condition and the J-curve effect, and further assess the effect of other macroeconomic variables including household consumption expenditure, government consumption expenditure, foreign income, money supply and domestic prices on trade balance. The bounds testing approach to cointegration and the error correction model within a symmetric and asymmetric autoregressive distributed lag (ARDL) framework is used for the estimation. Additionally, to analyse the dynamic interactions of the variables included in the estimated model, variance decomposition is applied. The results from both symmetric and asymmetric specifications show the absence of the Marshall-Lerner condition and the J-curve effect. Further, the study finds that household consumption expenditure, government consumption expenditure and domestic prices are negative and significant in the long and short run, whereas foreign income and money supply are positive and significant in the short run. Results from the variance decomposition show that innovations in household consumption expenditure highly contribute to the forecast error variance of the trade balance compared with other explanatory variables. A key finding of the study suggests that depreciation of the Ghana cedi is not an appropriate step to help in improving the country’s trade balance position. JEL Codes: C22, F10, F31, F32

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

Journal of Economics Management and Trade ◽

10.9734/jemt/2020/v26i630264 ◽

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.

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