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The J-Curve At The Industry Level: Evidence From Trade Between The Us And Australia

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  • MOHSEN BAHMANI-OSKOOEE
  • YOMGQING WANG

Abstract

Previous studies that tested the J-curve phenomenon for Australia used trade data either between Australia and the rest of the world or between Australia and its trading partners on a bilateral basis. They were unable to find support for the J-curve in the short run nor any significant relation between the trade balance and the exchange rate in the long run. In this paper we disaggregate the data between Australia and its second largest trading partner, the US, and consider the trade between 108 industries. Using annual data over the 1962-2003 period and bounds testing approach to cointegration and error-correction modelling, we are able to discover short-run effects of currency depreciation on the trade balance in 64 industries. The long-run and positive effects were only evidenced in 35 cases, supporting the J-curve. Copyright 2007 The Authors Journal compilation 2007 Blackwell Publishing Ltd/ University of Adelaide and Flinders University .

Suggested Citation

  • Mohsen Bahmani-Oskooee & Yomgqing Wang, 2007. "The J-Curve At The Industry Level: Evidence From Trade Between The Us And Australia ," Australian Economic Papers, Wiley Blackwell, vol. 46(4), pages 315-328, December.
  • Handle: RePEc:bla:ausecp:v:46:y:2007:i:4:p:315-328
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    References listed on IDEAS

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    Cited by:

    1. Baek, Jungho & Koo, Won W. & Mulik, Kranti, 2009. "Exchange Rate Dynamics and the Bilateral Trade Balance: The Case of U.S. Agriculture," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 38(2), October.
    2. 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.
    3. Houssem Eddine Chebbi & Marcelo Olarreaga, 2011. "Agricultural Trade Balance and Exchange Rate Depreciation: The Case of Tunisia," Working Papers 610, Economic Research Forum, revised 08 Jan 2011.

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