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Industry trade and exchange-rate fluctuations: Evidence from the U.S. and Chile

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  • Bahmani-Oskooee, Mohsen
  • Harvey, Hanafiah
  • Hegerty, Scott W.

Abstract

In recent years, research on the effects of currency movements on trade has used disaggregated data and error-correction and cointegration models. The resulting short-run and long-run estimates can be used to isolate not only specific industry responses, but also dynamic effects such as the “J curve.” This study examines the United States' trade balance with Chile, both at the aggregate level and for 49 individual industries. Of the 40 cointegrated industries, only ten improve in the long run after a depreciation, and only nine exhibit the temporary deterioration and eventual improvement typical of a “J curve.” We find that most effects concentrated among certain manufactures, with agricultural products and raw materials responding less to currency movements than do other commodities.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 29 (2014)
Issue (Month): C ()
Pages: 619-626

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Handle: RePEc:eee:reveco:v:29:y:2014:i:c:p:619-626

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Web page: http://www.elsevier.com/locate/inca/620165

Related research

Keywords: Industry trade; Bounds testing; United States; Chile;

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References

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  1. Juha Tervala, 2011. "Learning by Devaluating: A Supply-Side Effect of Competitive Devaluation," Discussion Papers 67, Aboa Centre for Economics.
  2. Mohsen Bahmani-Oskooee & Scott Hegerty, 2011. "The J-curve and NAFTA: evidence from commodity trade between the US and Mexico," Applied Economics, Taylor & Francis Journals, vol. 43(13), pages 1579-1593.
  3. Paresh Kumar Narayan, 2005. "The saving and investment nexus for China: evidence from cointegration tests," Applied Economics, Taylor & Francis Journals, vol. 37(17), pages 1979-1990.
  4. Rose, Andrew K., 1990. "Exchange rates and the trade balance : Some evidence from developing countries," Economics Letters, Elsevier, vol. 34(3), pages 271-275, November.
  5. Mohsen Bahmani-Oskooee & Hanafiah Harvey & Scott Hegerty, 2013. "Regime changes and the impact of currency depreciations: the case of Spanish–US industry trade," Empirica, Springer, vol. 40(1), pages 21-37, February.
  6. Bahmani-Oskooee, Mohsen & Bolhassani, Marzieh & Hegerty, Scott W., 2011. "Industry trade between Canada and Mexico: Will a weakening peso help Mexican manufacturing in the long run?," The North American Journal of Economics and Finance, Elsevier, vol. 22(2), pages 89-101, August.
  7. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
  8. Rose, Andrew K. & Yellen, Janet L., 1989. "Is there a J-curve?," Journal of Monetary Economics, Elsevier, vol. 24(1), pages 53-68, July.
  9. Schmeiser, Katherine N., 2013. "The firm export and FDI choice in the context of gravity," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 592-596.
  10. Bahmani-Oskooee, Mohsen & Hegerty, Scott W., 2009. "The Japanese-U.S. trade balance and the yen: Evidence from industry data," Japan and the World Economy, Elsevier, vol. 21(2), pages 161-171, March.
  11. Cheng, Ka Ming & Kim, Hyeongwoo & Thompson, Henry, 2013. "The real exchange rate and the balance of trade in US tourism," International Review of Economics & Finance, Elsevier, vol. 25(C), pages 122-128.
  12. Mohsen Bahmani-Oskooee & Artatrana Ratha, 2004. "The J-Curve: a literature review," Applied Economics, Taylor & Francis Journals, vol. 36(13), pages 1377-1398.
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