The J-Curve Hypothesis: Evidence from Commodity Trade Between South Africa and the United States

Amusa, Hammed; Fadiran, David

doi:10.1080/10800379.2019.12097343

Cited by 17 publications

(22 citation statements)

References 21 publications

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“…The exchange rate channel is the second. Because of local currency depreciation, denominated local assets are cheaper relative to foreign goods as a result of an increase in money supply resulting from a fall in the interest rate (Amusa & Fadiran, 2019). As a result, net exports and output would grow.…”

Section: Theoretical Frameworkmentioning

confidence: 99%

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West African Monetary Policy, External Shocks and Economic Growth Dynamics: An S-Var Model

Muhammed

Tela²,

Wahab³

2022

LBIBF

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As a result of the West African region's continuous political and economic instability, various economies have used monetary policy changes to respond to shocks from macroeconomic causes. Scholars disagree on the mechanisms of monetary policy, external shocks, and macroeconomic activity links in an economy, according to the available literature in both inter-regional and intra-regional evaluations. This article promotes understanding and management of external shocks in monetary policy by focusing on two key goals. (1) To investigate external shocks, macroeconomic performance, and the dynamics of monetary policy in Western African countries. (2) Use the S-VAR method of estimate to investigate the impact of these economic indices on monetary policy dynamics in Nigeria, Ghana, Cameroon, and Niger. The S-VAR method was chosen because it is useful for analysing macroeconomic shocks and monetary policy transmission. The findings reveal that the West African countries are so interconnected, any change in the price of non-oil commodities would have a significant impact on the exchange rate, which will be channelled through policy rates to GDP. We recommend and emphasise the need of diversifying member countries' productive and export bases rather than continuing to rely on one or a few items as the primary source of income.

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Section: Theoretical Frameworkmentioning

confidence: 99%

“…Early econometric models frequently have lower estimated sensitivities, implying a small channel. however, models that impose uncovered interest parity tend to find a larger importance for this channel (Amusa & Fadiran, 2019). The exchange rate channel is critical in determining how monetary policy affects the economy.…”

Section: Monetary Transmission Mechanismsmentioning

confidence: 99%

West African Monetary Policy, External Shocks and Economic Growth Dynamics: An S-Var Model

Muhammed

Tela²,

Wahab³

2022

LBIBF

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“…For the existence of the Jcurve effect in South Africa, Schaling and Kabundi (2014) determined this relationship for the 1994-2011 period; In this study, in which variables such as real effective exchange rate, trade balance and real GDP were used, it was determined that the J curve was valid. Amusa and Fadiran (2019), on the other hand, tested the validity of the J curve on the basis of 19 sectors with quarterly data for the period 1991:Q4-2016Q3 in the USA and South Africa, and concluded that the existence of the J curve is supported.…”

Section: Extended Abstractmentioning

confidence: 99%

Türkiye’nin Dış Ticaretinde J Eğrisi Hipotezinin Analizi

Güneş

2021

Fiscaoeconomia

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J Curve Hypothesis stated that the foreign trade balance may worsen at the beginning in the short term, but it will improve later in the long term after the devaluation. According to the hypothesis, the foreign trade balance will worsen because it does not react immediately against price changes in the exchange rate in the short term. However, the foreign trade balance will improve thanks to doing some regulations in the long term.The reason for that is related to Marshall-Lerner's condition. Marshall-Lerner condition means that the total export and import price elasticities is bigger than 1 which is based on J Curve.In this study, it was investigated whether the J Curve Hypothesis is valid in Turkey.It was done the short and long term causality, cointegration and FMOLS test which showing the nondeviating coefficients of the relationship, with the data-containing the monthly time series for the period of January 2010-September 2019. As a result of the analysis, the real effective exchange rate is not a reason for export in the short term. That's why the J Curve in Turkey has reached the conclusion that is not valid. However, the real effective exchange rate is a reason for imports in the short term. In the long run, there is a causal relationship between the real Exchange rate and exports and imports. Johansen cointegration test has been carried out since the variables 1.difference and a long-term relationship between real effective exchange rates and exports and imports has been identified. According to the FMOLS estimator, a 1 unit increase in a real effective exchange rate increases export by 0.33 units and import by 0.439 units. This indicates that foreign trade deficits in Turkey will continue in the long run.

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“…Interestingly, there have been some observations recently made by academics and international governing agencies on how currency appreciations or depreciations influence industrial-level trade activity in the sacu region. For instance, Amusa and Fadiran (2019) show that South Africa's period of strong export performance and economic growth coincided with periods when the exchange rate was appreciating. Moreover, the World Bank (2015a) highlighted that, despite Botswana's reliance on natural resource exports, the country has not been affected by the 'Dutch Disease' even though the Pula has been overvalued since the global financial crisis.…”

Section: Introductionmentioning

confidence: 99%

“…The consensus drawn from these studies is that exchange rate depreciations (appreciations) enhance (deteriorate) manufacturing and agricultural trade activity in South Africa. It is only the more recent studies of Amusa and Fadiran (2019) and Bahmani-Oskooee and Gelan (2020) which have examined the effects of exchange rate on a range of industry-level trade sectors in South Africa. On one hand, Amusa and Fadiran (2019) find J-curve effects in 6 out of 22 industries (live animals, prepared foodstuffs, textiles, machinery, toys and sports apparel, art works) whilst on the other hand, Bahmani-Oskooee and Gelan (2020) verify J-curve effects in 8 out of 25 industries (agriculture, marine products, food products, beverages and tobacco, wood products, printed material, machinery, computer and electronics).…”

Section: Introductionmentioning

confidence: 99%

Industry-Level Evidence of J-Curve Effects in the SACU Region

Mhaka

Ncwadi²,

Phiri³

2023

MGT

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Our study examines the cointegration relationship between exchange rate movements and trade balances for the five Southern African Customs Union (SACU) countries between 1995 and 2020. We disaggregate trade activity at an industry-level for 19 trade products and then determine whether industries benefit or are at a disadvantage during periods of currency depreciations over the short- and long-run. Applying pooled mean group (PMG) estimators to panel regression specifications of the industry-level J-curve, we find that exchange rate depreciations would be beneficial in 8 out of the 19 trade industries in the SACU region whilst harming theremaining 11 industries. In the strict, theoretical sense we only find J-curve effects in 6 of the 19 industries in which exchange depreciation initially hurt trade balances and then ‘adjust’ towards positive long-run effects. Altogether, we advise policymakers in SACU countries to consider devising (i) export-oriented policies for industries whose trade balance is strengthened by currency depreciations and (ii) import substitution industrialization policies and currency-risk mitigation strategies for industries whose trade balance is weakened by currency depreciations.

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The J-Curve Hypothesis: Evidence from Commodity Trade Between South Africa and the United States

Cited by 17 publications

References 21 publications

West African Monetary Policy, External Shocks and Economic Growth Dynamics: An S-Var Model

West African Monetary Policy, External Shocks and Economic Growth Dynamics: An S-Var Model

Türkiye’nin Dış Ticaretinde J Eğrisi Hipotezinin Analizi

Industry-Level Evidence of J-Curve Effects in the SACU Region

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