Does a J-curve exist for Korea and Taiwan? |
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Authors: | Han-Min Hsing Andreas Savvides |
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Institution: | (1) Department of Finance, National Ping Tung Institute of Commerce, Ping Tung, Taiwan;(2) Department of Economics, Oklahoma State University, 74078 Stilwater, OK |
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Abstract: | This article examines whether the trade balance of two dynamic export-oriented economies, Korea and Taiwan, exhibits a J-curve effect. The article studies both their bilateral and aggregate trade balance during the flexible exchange-rate era. When the exchange-rate coefficients are unconstrained, we demonstrate that no J-curve effect exists either for bilateral or aggregate trade balances. Several robustness checks confirm the validity of our findings. When a polynomial-distribute lag structure is imposed on exchange-rate coefficients, a J-curve is evident in some cases. The article discusses possible explanations for the general lack of evidence in favor of a J-curve, including the response of a small country's trade balance to exchange-rate changes. |
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Keywords: | trade balance Korea Taiwan J-curve |
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