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The real peso–dollar rate and US–Mexico industry trade: an asymmetric analysis

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  • Mohsen Bahmani‐Oskooee
  • Hanafiah Harvey
  • Scott W. Hegerty

Abstract

In an attempt to improve upon previous analyses and find further evidence for exchange rate theories such as the ‘J‐curve', numerous studies have introduced novel econometric approaches that might help uncover significant results through disaggregation and nonlinearity. This study applies the nonlinear cointegration method of Shin et al. () to US–Mexican trade balances in 91 individual industries. While the linear model yields support for the ‘J‐curve' effect in 16 industries, the nonlinear model raises this number to 29 which includes the two largest industries that engage in 35% of the trade between two countries. Furthermore, while the short‐run asymmetric effects of exchange rate changes were discovered in almost all industries, short‐run effects translated to significant long‐run asymmetric effects in 52 industries.

Suggested Citation

  • Mohsen Bahmani‐Oskooee & Hanafiah Harvey & Scott W. Hegerty, 2018. "The real peso–dollar rate and US–Mexico industry trade: an asymmetric analysis," Scottish Journal of Political Economy, Scottish Economic Society, vol. 65(4), pages 350-389, September.
    • Handle: RePEc:bla:scotjp:v:65:y:2018:i:4:p:350-389
    DOI: 10.1111/sjpe.12175
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    References listed on IDEAS

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    1. Ho, Sy-Hoa & Nguyen, Trung-Thanh & To-The, Nguyen, 2020. "Asymmetry and Symmetry of real exchange rate effect on the bilateral trade balance between Vietnam and the United States: aggregated and disaggregated levels of investigation," MPRA Paper 98416, University Library of Munich, Germany.

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