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Do exchange rate changes have symmetric or asymmetric effects on the trade balance? Evidence from U.S.–Korea commodity trade

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  • Bahmani-Oskooee, Mohsen
  • Baek, Jungho

Abstract

Previous studies of the effects of exchange rate changes on Korea’s trade balance have assumed symmetry between currency depreciation and appreciation. In this paper, we distinguish between the two to show that the effects at the industry level are in fact asymmetrical in most industries for Korea’s bilateral trade with the U.S. We employ an auto-regressive distributed lag (ARDL) approach using quarterly data for the period 1989–2014 for the 79 3-digit industries in which trade between Korea and the U.S. took place. Overall, our model incorporating differentiated responses for appreciation versus depreciation reveals a more significant impact of the exchange rate on commodity trade between Korea and the U.S. than a more standard model that imposes symmetry.

Suggested Citation

  • Bahmani-Oskooee, Mohsen & Baek, Jungho, 2016. "Do exchange rate changes have symmetric or asymmetric effects on the trade balance? Evidence from U.S.–Korea commodity trade," Journal of Asian Economics, Elsevier, vol. 45(C), pages 15-30.
  • Handle: RePEc:eee:asieco:v:45:y:2016:i:c:p:15-30
    DOI: 10.1016/j.asieco.2016.06.001
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    Cited by:

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    3. Sajad Ahmad Bhat & Javed Ahmad Bhat, 2021. "Impact of Exchange Rate Changes on the Trade Balance of India: An Asymmetric Nonlinear Cointegration Approach," Foreign Trade Review, , vol. 56(1), pages 71-88, February.
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    5. Salamat Ali, 2017. "Exchange Rate Effects on Agricultural Exports: Firm-level Evidence from Pakistan," Discussion Papers 2017-09, University of Nottingham, GEP.
    6. Mohsen Bahmani‐Oskooee & Abera Gelan, 2020. "The South Africa‐U.S. Trade and the Real Exchange Rate: Asymmetric Evidence from 25 Industries," South African Journal of Economics, Economic Society of South Africa, vol. 88(2), pages 186-203, June.

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    More about this item

    Keywords

    Exchange rate asymmetry; Commodity trade balance; J-curve; Korea;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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