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The J-Curve: Evidence from Industry Trade Data between US and UK

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  • M Bahmani-Oskooee
  • M Kovyryalova

Abstract

Previous research seeking to assess the short-run and long-run effects of currency depreciation on the UK trade balance has employed either aggregate trade data between U.K. and the rest of the world or bilateral trade data between U.K. and one of its major trading partners, the US. Neither group of studies was able to discover any significant relation beween the two variables. In this paper we disaggregate the trade data between the US and UK at the commodity level and try to assess the impact of changes in the real dollar-pound bilateral rate on the trade balance of each industry. Using the bounds-testing approach to cointegration and error-correction modeling we show that 107 of 177 industries' trade balance respond to a real depreciation in the British pound in the short-run. The short-run effects last into the long-run only in 66 industries, supporting a new definition of the J-Curve.

Suggested Citation

  • M Bahmani-Oskooee & M Kovyryalova, 2008. "The J-Curve: Evidence from Industry Trade Data between US and UK," Economic Issues Journal Articles, Economic Issues, vol. 13(1), pages 25-44, March.
    • Handle: RePEc:eis:articl:108bahmani
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    References listed on IDEAS

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    Cited by:

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    2. Ayşen SİVRİKAYA & Serdar ONGAN, 2019. "BREXIT and the J-Curve Hypothesis for the UK: A Nonlinear ARDL Approach," Sosyoekonomi Journal, Sosyoekonomi Society, issue 27(40).
    3. Crucini, Mario J. & Davis, J. Scott, 2016. "Distribution capital and the short- and long-run import demand elasticity," Journal of International Economics, Elsevier, vol. 100(C), pages 203-219.
    4. Shaar, Karam & Baharumshah, Ahmad Zubaidi, 2016. "US-China trade: Who is telling the truth?," Working Paper Series 5146, Victoria University of Wellington, School of Economics and Finance.
    5. Nasir, Muhammad Ali & Vo, Xuan Vinh, 2020. "A quarter century of inflation targeting & structural change in exchange rate pass-through: Evidence from the first three movers," Structural Change and Economic Dynamics, Elsevier, vol. 54(C), pages 42-61.
    6. BAHMANI-OSKOOEE, Mohsen & HALICIOGLU, Ferda & GHODSI, Seyed Hesam, 2016. "Asymmetric Effects of Exchange Rate Changes on British Bilateral Trade Balances," MPRA Paper 73477, University Library of Munich, Germany.
    7. Stefano Lucarelli & Filippo Umberto Andrini & Annamaria Bianchi, 2018. "Euro depreciation and trade asymmetries between Germany and Italy versus the US: industry-level estimates," Applied Economics, Taylor & Francis Journals, vol. 50(1), pages 15-34, January.
    8. Mohsen Bahmani-Oskooee & Muhammad Ali Nasir, 2020. "Asymmetric J-curve: evidence from industry trade between U.S. and U.K," Applied Economics, Taylor & Francis Journals, vol. 52(25), pages 2679-2693, May.

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