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Several studies have tested the J-curve phenomenon for Australia using non-stationary aggregate trade data and have provided mixed results. They not only suffer from the 'aggregation bias problem' but also from the 'spurious regression problem'. To overcome these problems, in this paper we investigate the short-run and the long-run effects of real depreciation of the Australian dollar on the trade balance between Australia and each of her 23 trading partners using quarterly data over the 1973-2001 period and recent advances in cointegration analysis. The results from the bound testing approach for cointegration and error-correction modeling does not provide much support for the J-curve phenomenon. Copyright Blackwell Publishing Ltd/ University of Adelaide and Flinders University 2005..

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Purpose -To avoid aggregation bias by using trade data at bilateral level so that we can determine how sensitive are Britain's inpayments and outpayments to the value of the British pound. Design/methodology/approach -The method is based on the bounds testing approach to cointegration and error-correction modeling. Findings -The main finding is that while UK inpayments are not sensitive to the exchange rate, her outpayments are. Research limitations/implications -Future research must concentrate on disaggregating data further, perhaps at commodity level. Practical implications -The results could be used to identify Britain's trading partners against which Britain can devalue the pound and improve her trade balance. Originality/value -No study has attempted to test the impact of real depreciation of the pound on Britain's payments and receipts with her major trading partners.