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Dynamics of the Trade Balance: The Turkish J-Curve

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  • ELIF AKBOSTANCI

Abstract

The J-curve hypothesis suggests a specific pattern for the response of the trade balance to real exchange rate changes; a real depreciation initially worsens the trade balance, but through time the trade balance improves, and thus the response of the trade balance over time generates a tilted J-shape. This study investigates the existence of a J-curve in the Turkish data in the 1987-2000 period by using quarterly data. First, an error correction model is estimated to differentiate between the long-run equilibrium and short-run dynamics. Then the response of trade balance to real exchange rate shocks is investigated by using the generalized impulse response methodology. Even though the suggested long-run pattern, which is the improvement of the trade balance in response to a real depreciation emerges, our results do not exactly support the J-curve hypothesis in the short run.

Suggested Citation

  • Elif Akbostanci, 2004. "Dynamics of the Trade Balance: The Turkish J-Curve," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 40(5), pages 57-73, September.
  • Handle: RePEc:mes:emfitr:v:40:y:2004:i:5:p:57-73
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. H. Bayram Irhan & Nur Dilbaz Alacahan & Levent Korap, 2011. "An Empirical Model for the Turkish Trade Balance: New Evidence from ARDL Bounds Testing Analyses," Istanbul University Econometrics and Statistics e-Journal, Department of Econometrics, Faculty of Economics, Istanbul University, vol. 14(1), pages 38-61, May.
    2. repec:asi:aeafrj:2017:p:858-868 is not listed on IDEAS
    3. repec:sae:globus:v:18:y:2017:i:5:p:1199-1214 is not listed on IDEAS
    4. Çatık, Abdurrahman Nazif & Gök, Barış & Akseki, Utku, 2015. "A nonlinear investigation of the twin deficits hypothesis over the business cycle: Evidence from Turkey," Economic Systems, Elsevier, vol. 39(1), pages 181-196.
    5. Mehmet Yazici, 2008. "The Exchange Rate and the Trade Balances of Turkish Agriculture, Manufacturing and Mining," Quality & Quantity: International Journal of Methodology, Springer, vol. 42(1), pages 45-52, February.
    6. Muhammad Ahad, 2017. "Impact of Financial Development on Trade Balance: An ARDL Cointegration and Causality Approach for Pakistan," Global Business Review, International Management Institute, vol. 18(5), pages 1199-1214, October.
    7. Mehmet Yazici, 2010. "Is there a J-curve effect in Turkish services?," Quality & Quantity: International Journal of Methodology, Springer, vol. 44(1), pages 167-172, January.
    8. P., Srinivasan & M., Kalaivani, 2012. "Exchange Rate Volatility and Export Growth in India: An Empirical Investigation," MPRA Paper 43828, University Library of Munich, Germany.
    9. Halicioglu, Ferda, 2008. "The bilateral J-curve: Turkey versus her 13 trading partners," Journal of Asian Economics, Elsevier, vol. 19(3), pages 236-243, June.
    10. repec:eee:ecosys:v:41:y:2017:i:2:p:279-296 is not listed on IDEAS
    11. Mohsen Bahmani & Hanafiah Harvey & Scott W. Hegerty, 2013. "Empirical tests of the Marshall-Lerner condition: a literature review," Journal of Economic Studies, Emerald Group Publishing, vol. 40(3), pages 411-443, May.

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