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Dynamics of the Trade Balance: The Turkish J-Curve

Listed author(s):
  • ELIF AKBOSTANCI
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    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.

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    File URL: http://mesharpe.metapress.com/link.asp?target=contribution&id=CNYCJQ360UT6GC3W
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    Article provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.

    Volume (Year): 40 (2004)
    Issue (Month): 5 (September)
    Pages: 57-73

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    Handle: RePEc:mes:emfitr:v:40:y:2004:i:5:p:57-73
    Contact details of provider: Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024

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