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Bilateral J-Curves between Pakistan and Her Trading Partners

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  • Zehra Aftab

    (Pakistan Institute of Development Economics, Islamabad)

  • Sajawal Khan

    (Pakistan Institute of Development Economics, Islamabad)

Abstract

Earlier studies that investigated the J-Curve phenomenon for Pakistan employed aggregate trade data. These studies suffered from the “aggregation bias” problem. In order to overcome this constraint, this paper tests the effects of real exchange rate depreciation in the Pakistani Rupee on the bilateral trade balance between Pakistan and her 12 respective trade partners. These countries, together, account for almost half of Pakistan’s total trade. In order to differentiate between the long-run equilibrium and short-run disequilibrium dynamics, and also to deal with non-stationary data, the ARDL approach is used. The results do not provide any support for the standard J-curve phenomenon.

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File URL: http://www.pide.org.pk/pdf/Working%20Paper/WorkingPaper-45.pdf
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Bibliographic Info

Paper provided by Pakistan Institute of Development Economics in its series PIDE-Working Papers with number 2008:45.

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Length: 11 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:pid:wpaper:2008:45

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Keywords: J-Curve; Trade Balance; Marshall-Lerner Condition;

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  1. Stephen P. Magee, 1973. "Currency Contracts, Pass-Through, and Devaluation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(1), pages 303-325.
  2. Rose, Andrew K., 1991. "The role of exchange rates in a popular model of international trade : Does the 'Marshall-Lerner' condition hold?," Journal of International Economics, Elsevier, Elsevier, vol. 30(3-4), pages 301-316, May.
  3. Rose, Andrew K., 1990. "Exchange rates and the trade balance : Some evidence from developing countries," Economics Letters, Elsevier, Elsevier, vol. 34(3), pages 271-275, November.
  4. Swarnjit Arora & Mohsen Bahmani-Oskooee & Gour Goswami, 2003. "Bilateral J-curve between India and her trading partners," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 35(9), pages 1037-1041.
  5. Rose, Andrew K. & Yellen, Janet L., 1989. "Is there a J-curve?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 24(1), pages 53-68, July.
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