Import-content of exports and J-curve effect

Abstract

This article investigates how the response to devaluation of trade balance is affected, compared to J-curve hypothesis, by the presence of imported inputs in the production of exports. Using first the Almon lag technique and then the cointegration and the generalized impulse response function analysis, the J-curve effect is examined in two sectors of Turkish economy (manufacturing and mining), which use imported inputs at different rates. Based on the data covering the period from the first quarter of 1986 to the third quarter of 1998, our results indicate that in neither sector J-curve exists and that the violation of the J-curve effect is more severe in the sector with higher import content

Asymmetric cointegration and the J-curve: evidence from commodity trade between Turkey and EU

“…To reduce the bias further, two studies test the J-curve hypothesis at industry level. Yazici and Klasra (2010) investigated response of two sectors of Turkish economy, i.e., manufacturing and mining with 24.9% and 8.2% imported inputs respectively. They found an inverse of the J-curve pattern in both sectors.…”

Determinants of Turkish Mining Trade Balance With Eu(15): Estimates From Bound Testing Approach

“…These papers, Yazici (2008) and Yazici and Klasra (2010), are close to ours in the sense that they also examine the Turkish mining trade balance. Despite this similarity, there are three main differences: they look into Turkey's mining trade in the context of world trade, not trade with EU (15), different econometric methods, Almon lag technique and impulse response function, are employed by them and they don't consider the effect on the trade balance of customs union agreement.…”

“…Regarding the mining trade balance of Turkey, it is investigated in the literature but in a few papers, which, to the best of our knowledge, are Yazici (2008) and Yazici and Klasra (2010). Yazici (2008) examines and compares, using Almon lag technique, the response to exchange rate changes of trade balances with the rest of the world of three Turkish sectors; agriculture, manufacturing and mining.…”

“…It is found that in the short-run in response to domestic currency depreciation mining trade balance first improves, then worsens and then improves again and in the long-run agricultural trade balance improves as a result of depreciation of domestic currency. Yazici and Klasra (2010) investigates, in the context of manufacturing and mining sectors of Turkish economy that use imported inputs at different rates, how the response of trade balance to currency devaluation is affected by usage of imported inputs in production of exports. They report that in none of the two sectors j-curve effect exists and that violation of j-curve effect is less severe in the sector with lower import content, mining.…”

Impact of Exchange Rate and Customs Union on Trade Balance at Commodity Level of Turkey With Eu (15)

“…Yazici (2008) examines and compares the response to exchange rate changes of trade balances of three Turkish sectors; agriculture, manufacturing and mining. Yazici and Klasra (2010) investigates, in the context of two sectors of Turkish economy that use imported inputs at different rates, how the response of trade balance to currency devaluation is affected by usage of imported inputs in production of exports.…”