Dynamic analysis of trade balance behavior in a small open economy: the J-curve phenomenon and the Czech economy

Gürtler, Martin

doi:10.1007/s00181-018-1445-4

Cited by 11 publications

(8 citation statements)

References 30 publications

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“…While the existing literature about J-curve effect in the trade between European Union (EU) countries and their partners is plentiful (e.g., Hacker and Hatemi-J, 2003 ; 2004 ; Bahmani-Oskooee et al., 2006 ; Hsing, 2009 ; Hsing and Sergi, 2009 ; Šimáková and Stavárek, 2013 ; 2014 ; Nusair, 2017 ; Michail, 2018 ; Gürtler, 2018 ; Lucarelli et al., 2018 ), few studies are dedicated for Vietnam. Phan and Jeong (2015) analyzed Vietnam's trade balance with 16 partners by using Fully Modified OLS and Dynamic OLS estimators for the panel data ranging from 1999Q1 to 2012Q4 and reported that exchange rate negatively influenced trade balance and thus no J-curve effect.…”

Section: Literature Reviewmentioning

confidence: 99%

Asymmetric impact of exchange rate on trade between Vietnam and each of EU-27 countries and the UK: evidence from nonlinear ARDL and the role of vehicle currency

Bao

2021

Heliyon

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The relationship between exchange rate and trade balance has been spotlighted in the past several decades and thus examined by manifold research. The findings, however, lack of consensus despite the intensive efforts in investigating the role of exchange rate as an important determinant of trade balance in various countries. Although the existing papers are abundant, most of them neglect the role of vehicle currency. Besides, few articles are dedicated to Vietnam, and none has inspected the exchange rate-trade balance nexus between Vietnam and the EU. This study is the first to scrutinize how bilateral exchange rates, together with vehicle currency exchange rate, asymmetrically impact Vietnam's bilateral trade balance with respect to EU-27 countries and the UK. The NARDL estimation results strongly acknowledge the importance of USD as vehicle currency when more significant short-run and long-run coefficients are found. Accordingly, this article can provide some useful implications for policy-makers, especially when Vietnam was first labelled currency manipulator by the USA in December 2020. Particularly, USD/VND movement can affect not only Vietnam-USA but also Vietnam-EU and Vietnam-UK trade balance. In addition, VND appreciation against USD seems beneficial to Vietnam's bilateral trade with the EU plus the UK.

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Section: Literature Reviewmentioning

confidence: 99%

Asymmetric impact of exchange rate on trade between Vietnam and each of EU-27 countries and the UK: evidence from nonlinear ARDL and the role of vehicle currency

Bao

2021

Heliyon

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“…Third, the bounds test was conducted using the unrestricted model, an important requirement, given a note by Pesaran et al (2001, p. 312) and Gürtler (2019, p. 485) that failure to keep the coefficients of lagged changes unrestricted may result in tests’ suffering from a pre-testing problem. However, the imposition of restrictions after the cointegration test potentially brings more parsimonious and accurate estimates.…”

Section: Resultsmentioning

confidence: 99%

The J-Curve Effect in Services Trade: A Disaggregated Analysis

Trofimov

2022

Foreign Trade Review

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This article examines the relationship between the real exchange rate and the services trade balance in the UK using the quarterly data for the 2005Q1–2019Q4 period. We consider the aggregate as well as disaggregated trade across five services categories. We employ linear and non-linear autoregressive distributed lag (ARDL) models. The non-linear model, in particular, allows consideration of asymmetric response of the trade balance to depreciations as opposed to appreciations. The findings indicate little evidence of a long-term improvement in the trade balance following depreciation, and suggest the absence of J-curve effect. The effects of domestic, ‘rest of the world’ GDP and monetary base on the trade balance were respectively negative, positive and mixed. JEL: F14, F31, C22

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“…With the increasingly available data and econometric methodologies, a vast amount of literature emerged where bilateral analysis focuses on a specific country relationship with her major trading partners, covering both developed and developing countries as the country of interest (see, e.g., Bahmani-Oskooee and Hegerty 2010 for a survey). The studies differ in terms of their conclusion about the existence of the J-curve effect and its extent, and no consensus has been reached using the bilateral analysis, still leaving room for the debate of 'aggregation bias' to continue (e.g., Gürtler 2019).…”

Section: Literature Reviewmentioning

confidence: 99%

“…While it is interesting to find the global perspective allowing for country-specific heterogeneity, combining the experiences of small and large economies, developing and developed economies are often misleading. For individual country context, policy recommendations need to be based on a countryspecific analysis of complex bilateral relations with various trading partners (Gürtler 2019). We aim to bridge this gap in the literature using Bangladesh as a case.…”

Section: Literature Reviewmentioning

confidence: 99%

Aggregation, asymmetry, and common factors for Bangladesh’s exchange rate–trade balance relation

et al. 2021

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We present an application of the recent CS-ARDL methodology in the context of a country’s trade balance–exchange rate relationship. The trade balance is expected to deteriorate first before improving in response to currency depreciation and vice versa, widely known as the J-curve effect satisfying the Marshall–Lerner condition in the long run. Combining bilateral and aggregate analysis in one setting by constructing specific panel data with one reference country, we find that aggregate analysis is sensitive to our allowance for heterogeneity. Estimates using the aggregate time series data show evidence favoring the J-curve relation, whereas the aggregate analysis resulting from the panel time series data shows that currency appreciation improves trade balance in Bangladesh in the long run, which goes against the Marshall–Lerner condition. With the reference of the existing commodity-level literature, we argue that this atypical scenario lines with the realities of a ‘small’ economy like Bangladesh, where her exporters attempt to maintain their market share with some government support. The study provides essential policy suggestions by identifying the significant contributors to Bangladesh’s trade balance–exchange rate relationship: China, Japan, and Singapore.

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Dynamic analysis of trade balance behavior in a small open economy: the J-curve phenomenon and the Czech economy

Cited by 11 publications

References 30 publications

Asymmetric impact of exchange rate on trade between Vietnam and each of EU-27 countries and the UK: evidence from nonlinear ARDL and the role of vehicle currency

Asymmetric impact of exchange rate on trade between Vietnam and each of EU-27 countries and the UK: evidence from nonlinear ARDL and the role of vehicle currency

The J-Curve Effect in Services Trade: A Disaggregated Analysis

Aggregation, asymmetry, and common factors for Bangladesh’s exchange rate–trade balance relation

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