Asymmetric Cointegration,Nonlinear ARDL,and the J-Curve: A Bilateral Analysis of China and Its 21 Trading Partners |
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| Authors: | Mohsen Bahmani-Oskooee Niloy Bose |
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| Institution: | 1. The Center for Research on International Economics, Department of Economics, University of Wisconsin–Milwaukee, Milwaukee, Wisconsin, USA;2. Department of Economics, The University of Wisconsin–Milwaukee, Milwaukee, Wisconsin, USA;3. Department of Economics, The University of Wisconsin–Milwaukee, Milwaukee, Wisconsin, USA |
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| Abstract: | This article follows the nonlinear Autoregressive Distributed Lag (ARDL) error-correction methodology to explore nonlinearity in the relationship between the trade balances and the real exchange rates for China and its 21 partners. We find evidence for short-run asymmetric effects of exchange rate in cases of 18 partners, short-run adjustment asymmetry in cases of 11 partners, short-run cumulative asymmetry in cases of seven partners, and a significant long-run asymmetric effect cases of five partners. We find support for the “J-curve” that is only due to appreciation or depreciation of the Yuan in cases of five partners, including the U.S. |
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| Keywords: | asymmetry cointegration bilateral J-curve China nonlinear ARDL |
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