Asymmetric J-curve: evidence from UK-German commodity trade

Empirica - Previous studies that have investigated the J-curve phenomenon between the UK and its largest trading partner from the European Union (EU), Germany, used aggregate bilateral trade data...     

Asymmetric effects of exchange rate changes on the demand for money in Africa

In order to account for currency substitution, the exchange rate is included in the demand for money. More recent studies have demonstrated that exchange rate changes could have asymmetric effects on the demand for money or domestic currency. In this paper, we consider the experiences of 18 African countries and show that in most countries, indeed exchange rate changes have short-run asymmetric effects on the demand for money. However, short-run effects translate to long-run asymmetric effects only in a limited number of African countries.     

Bilateral Trade Balances of Malaysia with Her 11 Largest Trading Partners: New Evidence from Asymmetry Cointegration

Research on the effects of exchange rate changes on the trade balance is now moving in a new direction, by investigating whether exchange rate changes have symmetric or asymmetric effects. The approach that relies upon separating depreciations from appreciations introduces nonlinearity into the adjustment process and relies upon the nonlinear ARDL approach of Shin et al. [2014. Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework, in: R. Sickels and W. Horrace (Eds), Festschrift in Honor of Peter Schmidt: Econometric Methods and Applications, 281–314 (Springer)]. When we applied this new method to the bilateral trade balances of Malaysia with each of her 11 largest partners, we found adjustment asymmetry in all models, short-run impact asymmetry effects and long-run asymmetry effects in the trade balance models between Malaysia and Asian countries.     

Panel asymmetric nonlinear unit root test and PPP in Africa

This study revisits purchasing power parity (PPP) theory for 20 African countries using panel asymmetric nonlinear unit root test proposed by Emirmahmutoglu and Omay (2014), through the sequential panel selection method of Chortareas and Kapetanios (2009). While standard panel unit root tests fail to support the PPP, the empirical results from panel asymmetric nonlinear unit root test do support the PPP. However, additional tests reveal that support in all 20 African countries is mostly due to stationarity of the real effective exchange rates of Ghana and Rwanda where the adjustment process towards equilibrium is nonlinear and asymmetric.     

Nominal and real effective exchange rates of middle eastern countries and their trade performance

Indexes of real and nominal effective exchange rates that are published by the IMF, are mostly for industrial countries. None of the Middle Eastern countries have received any attention on this regard. This paper tries to close the gap by constructing such indexes for 11 middle eastern countries over 1971(I)–1994(IV) period. As an application, long-run response of their trade balance to devaluation is also investigated.     

On the relationship between the value of the mark and German production

This study employs Johansen's cointegration technique to determine the long-run relationship between exchange value of the DM and German production. It is shown that depreciation of the DM has a long-run expansionary impact on German production. This conclusion is based on a new method of selecting the order of VAR and the appropriate cointegrating vector simultaneously.     

Exchange rate sensitivity of commodity flows between the Philippines and the US

Previous studies that tried to assess the impact of exchange rate changes on the inpayments and outpayments of a country used aggregate trade flows between two countries. They are said to suffer from aggregation bias, and disaggregation by industry is recommended. In this paper, we consider response to exchange rate changes of export earnings (inpayments) of 133 industries that export from the US to the Philippines (Philippines’ importing industries) and outpayments of 65 US industries (Philippines exporting industries) that import from the Philippines using annual data over the period 1973–2012. While in most industries exchange rate changes had significant effects in the short run, the short-run effects did not last into the long run in most industries. Economic activity played more role in the long run than the exchange rate.     

Export growth and output growth: An application of bounds testing approach

The short-run and the long-run relationship between export growth and economic growth has received a great deal of attention in the literature. Cointegration techniques that have been employed by previous researchers require that the variables to be non-stationary but their linear combination to be stationary. When variables are not integrated of the same order, they are excluded from analysis. This needs not to be the case with the introduction of the bounds testing approach. Indeed, the approach does not require pre-unit-root testing. This paper applies this new method to export and output data from 44 developing countries and provides support for the export-led growth hypothesis in 60% of the countries.     

THE J CURVE: CHINA VERSUS HER TRADING PARTNERS

The short‐run effects of currency depreciation are said to be different from its long‐run effects. In the short run, the trade balance deteriorates and improvement comes after some time; hence, the J‐curve phenomenon. Previous studies that tested the response of the trade balance to exchange rate changes in China employed aggregate trade data and provided mixed results. Indeed, most of them concluded that real depreciation has no long‐run impact on the Chinese trade balance. In this paper, we disaggregate the data by country and using recent advances in time series modelling estimate a trade balance model between China and her 13 major trading partners. We show that real depreciation of the Chinese currency has a favourable impact on her trade balance with a few partners, especially the USA. Not much support is found for the J‐curve hypothesis.