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The Japanese-U.S. trade balance and the yen: Evidence from industry data

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  • Bahmani-Oskooee, Mohsen
  • Hegerty, Scott W.

Abstract

While it is often assumed that a country's trade balance will improve in the long-run if its currency is allowed to depreciate, this is not necessarily the case for specific goods. In the short run, the opposite might even take place, as fixed quantities and rising import prices cause the trade balance to deteriorate. In this paper, we apply cointegration methodology to assess the short- and long-run impact of fluctuations in the yen-dollar real exchange rate on Japan's trade balance with the U.S. for 117 industries. We find that depreciation causes the trade balance to improve in the long-run for about one-third of Japanese industries. Most short-run effects are in the same direction, indicating a quick improvement in these industries' trade balance, rather than a period of deterioration such as a "J-curve."

Suggested Citation

  • 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.
  • Handle: RePEc:eee:japwor:v:21:y:2009:i:2:p:161-171
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Mohsen Bahmani-Oskooee & Rustam Jamilov, 2014. "Export diversification and the S-curve effect in a resource-rich state: evidence from Azerbaijan," Economic Change and Restructuring, Springer, vol. 47(2), pages 135-154, May.
    2. Bahmani-Oskooee, Mohsen & Harvey, Hanafiah & Hegerty, Scott W., 2014. "Industry trade and exchange-rate fluctuations: Evidence from the U.S. and Chile," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 619-626.
    3. repec:eee:japwor:v:44:y:2017:i:c:p:26-34 is not listed on IDEAS
    4. Jacques Jaussaud & Serge Rey, 2012. "Long‐Run Determinants Of Japanese Exports To China And The United States: A Sectoral Analysis," Pacific Economic Review, Wiley Blackwell, vol. 17(1), pages 1-28, February.
    5. Jamilov, Rustam, 2012. "Is There a J-curve for Azerbaijan? Evidence from Industry-Level Analysis," MPRA Paper 39370, University Library of Munich, Germany.
    6. Bahmani-Oskooee, Mohsen & Harvey, Hanafiah & Hegerty, Scott, 2013. "Currency depreciations and the U.S.–Italian trade balance: Industry-level estimates," Research in Economics, Elsevier, vol. 67(3), pages 215-225.

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