IDEAS home Printed from https://ideas.repec.org/a/eme/jespps/v42y2015i3p519-530.html
   My bibliography  Save this article

Nonlinear ARDL approach, asymmetric effects and the J-curve

Author

Listed:
  • Mohsen Bahmani-Oskooee
  • Hadise Fariditavana

Abstract

Purpose - – Previous research that investigated the effects of currency depreciation on the trade balance assumed that the adjustment of all variables in a given model is in linear fashion. The authors wonder if introduction of nonlinearity in the adjustment of some variables such as the exchange rate can shed additional light on evidence of the J-curve. The new approach also allows to test whether exchange rate changes have symmetric or asymmetric effects on the trade balance. Estimates of a trade balance model for Canada, China, Japan, and the USA reveal that the effects are indeed asymmetric. The paper aims to discuss these issues. Design/methodology/approach - – The methodology is based on linear and nonlinear ARDL approach. Findings - – When nonlinearity is introduced into testing approach for the J-curve, more evidence is found in support of the J-curve. Research limitations/implications - – The models are estimated using aggregate trade flows of each country with the rest of the world, hence they suffer from aggregation bias. Using trade flows at bilateral level and at commodity level are highly recommended for future research. Originality/value - – This is the first paper that applies nonlinear ARDL approach to test the short-run and long-run effects of currency depreciation on the trade balance.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Hadise Fariditavana, 2015. "Nonlinear ARDL approach, asymmetric effects and the J-curve," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 42(3), pages 519-530, August.
  • Handle: RePEc:eme:jespps:v:42:y:2015:i:3:p:519-530
    DOI: 10.1108/JES-03-2015-0042
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/JES-03-2015-0042/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers

    File URL: https://www.emerald.com/insight/content/doi/10.1108/JES-03-2015-0042/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers

    File URL: https://libkey.io/10.1108/JES-03-2015-0042?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jespps:v:42:y:2015:i:3:p:519-530. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.