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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Paper provided by Pakistan Institute of Development Economics in its series PIDE-Working Papers with number
2008:45.
Length: 11 pages Date of creation: 2008 Date of revision: Handle: RePEc:pid:wpaper:2008:45
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Find related papers by JEL classification: F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies F14 - International Economics - - Trade - - - Country and Industry Studies of Trade F31 - International Economics - - International Finance - - - Foreign Exchange
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