Do exchange rate changes have symmetric or asymmetric effects on the trade balances of Asian countries?

Recently the linear ARDL approach was modified and a non-linear version of the same approach that is used mostly to assess asymmetric effects of some exogenous variables on the dependent variable was introduced. The non-linear model was recently used by one study to show that indeed exchange rate changes have asymmetric effects on the trade balance of a few advanced countries. The same was demonstrated for transition economies by another study. In this article, we provide additional asymmetric effects from seven Asian economies by showing that in most cases we find evidence of short-run and long-run asymmetric effects of exchange rate changes on the trade balance. Like other studies, our findings are country specific.     

Price and income elasticities: evidence from commodity trade between the U.S. and Egypt

Elasticity approach to balance of payments postulates that a country can enjoy an improvement in its trade balance in the long run if sum of import and export demand price elasticities exceed unity, a condition known as the Marshall-Lerner condition. Previous research tested this condition either using aggregate trade data between one country and rest of the world or between two countries and provided mixed results. They are all said to suffer from aggregation bias. To remove the bias, in this paper we concentrate on trade flows of two countries, i.e., the U.S. and Egypt and disaggregate their trade flows by commodity. The estimates reveal that the ML condition is met in 28 out of 36 industries that trade between the two countries.     

The Impact of Corruption on the Black Market Premium

Recently the impact of institutional factors on macro variables has been gaining momentum. Researchers have investigated the impact of corruption, law and order, and bureaucracy on economic growth, inflation, investment, productivity, and the real exchange rate. In this article, we investigate empirically the impact of institutional factors on the black market premium. In many developing nations, because of government restrictions on capital and trade flows, there exists a black market for foreign exchange. By using data from 60 developing countries over the 1982-1995 period, we show that the black market premium is higher in countries that are plagued by more corruption. This finding seems to be insensitive to five different measures of corruption as well as whether cross-section or panel data are used.     

Glass ceilings or glass doors? The role of firms in male‐female wage disparities

I use Canadian linked employer‐employee data to examine whether women face a glass ceiling in the labour market. I also measure the extent to which the glass ceiling comes about because women are segregated into lower‐paying firms, or because they are segregated into lower‐paying jobs within firms. I find clear evidence that women experience a glass ceiling that is driven by their disproportionate sorting across firm types (glass doors) rather than within firms. I find no evidence that these results are supply‐driven. However, my results are consistent with predictions of an efficiency wage model where high‐paying firms discriminate against females.     

The demand for money in an open economy: the United Kingdom

Most previous studies have estimated the demand for money without paying too much attention to developments in the foreign exchange markets. In light of the fact that any development abroad and in the foreign exchange markets could have implications for domestic stabilization, we make an attempt to incorporate such developments into the demand for money in the United Kingdom. More precisely, after incorporating a measure of real effective exchange rate of the British Pound into a dynamic money demand function, we estimated it for the UK using quarterly data over 1973–87 period. By relying upon the Akaike' Final Prediction Error criteria to select the optimum number of lags, it is shown that in addition to income and interest rate, the real effective exchange rate exerts significant effect on the UK demand for money in the short run as well as long run.     

Do MNCs spur financial markets in corrupt host countries?

This study investigates how MNCs can sway the growth of financial markets in the developing countries with prevalent political corruption. Using annual data of panel of 22 developing countries and applying dynamic generalized method of moment (GMM) technique, we find foreign firms can spur financial markets in the developing countries through direct investment. Furthermore, our results indicate the stimulus effect of foreign investment on financial development is stronger in the more corrupt countries.     

Does black market exchange rate volatility deter the trade flows? Iranian experience

Previous studies that investigated the impact of exchange rate volatility on the trade flows, employed official exchange rate data to construct a measure of exchange rate uncertainty. In this paper we show that in countries that there is a black market for foreign exchange, the black market exchange rate volatility could have adverse effect on the trade flows. We show this by using data from Iran and cointegration analysis.     

PURCHASING POWER PARITY IN LESS-DEVELOPED AND TRANSITION ECONOMIES: A REVIEW PAPER

Abstract.  The concept of purchasing power parity (PPP) has been the subject of numerous studies, many of which have been unable to prove conclusively this core principle of international finance. Although industrialized countries have received most of the attention, studies that focus on less-developed and transition economies have also attained mixed results. This study surveys trends in this branch of the literature, highlighting the econometric advances that have sought to solve this puzzle, while pointing out that more needs to be done to address the reasons that might cause PPP not to hold.     

Impact of exchange rate volatility on commodity trade between U.S. and China: is there a third country effect

Impact of exchange rate uncertainty on trade flows still continues to dominate the literature. Most previous research has used aggregate trade data between one country and the rest of the world or between two countries at a bilateral level. A recent study, however, considered the trade between the U.S. and China at the commodity level, but excluded the ??third-country?? effect in its analysis. In this paper, we consider the commodity trade between the U.S. and China one more time and investigate whether volatility of the real U.S. dollar-Canadian dollar has any implication on the trade flows between the U.S. and China. The answer happens to be in the affirmative, though a more significant third-country effect is found in the short run as compared to the long run.     

The Japanese–U.S. trade balance and the yen: Evidence from industry data

While it is often assumed that a country's trade balance will improve in the long-run if its currency is allowed to depreciate, this is not necessarily the case for specific goods. In the short run, the opposite might even take place, as fixed quantities and rising import prices cause the trade balance to deteriorate. In this paper, we apply cointegration methodology to assess the short- and long-run impact of fluctuations in the yen–dollar real exchange rate on Japan's trade balance with the U.S. for 117 industries. We find that depreciation causes the trade balance to improve in the long-run for about one-third of Japanese industries. Most short-run effects are in the same direction, indicating a quick improvement in these industries’ trade balance, rather than a period of deterioration such as a “J-curve.”