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Asymmetric Cointegration, Nonlinear ARDL, and the J-Curve: A Bilateral Analysis of China and Its 21 Trading Partners

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  • Mohsen Bahmani-Oskooee
  • Niloy Bose
  • Yun Zhang

Abstract

This article follows the nonlinear Autoregressive Distributed Lag (ARDL) error-correction methodology to explore nonlinearity in the relationship between the trade balances and the real exchange rates for China and its 21 partners. We find evidence for short-run asymmetric effects of exchange rate in cases of 18 partners, short-run adjustment asymmetry in cases of 11 partners, short-run cumulative asymmetry in cases of seven partners, and a significant long-run asymmetric effect cases of five partners. We find support for the “J-curve” that is only due to appreciation or depreciation of the Yuan in cases of five partners, including the U.S.

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  • Mohsen Bahmani-Oskooee & Niloy Bose & Yun Zhang, 2018. "Asymmetric Cointegration, Nonlinear ARDL, and the J-Curve: A Bilateral Analysis of China and Its 21 Trading Partners," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(13), pages 3131-3151, October.
  • Handle: RePEc:mes:emfitr:v:54:y:2018:i:13:p:3131-3151
    DOI: 10.1080/1540496X.2017.1373337
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    Cited by:

    1. Trofimov, Ivan D., 2020. "Real Exchange Rate and the Dynamics of Services Trade Balance in the UK: A Linear and Non-linear ARDL Analysis," MPRA Paper 106703, University Library of Munich, Germany.
    2. Bao, Ho Hoang Gia & Le, Hoang Phong, 2021. "ASEAN's trade balance with the whole EU-28 at industry level: The role of vehicle currency," The Journal of Economic Asymmetries, Elsevier, vol. 24(C).
    3. Ibrar Hussain & Muhammad Rafiq Author-Workplace-Name Institute of Management Sciences Peshawar-Pakistan & Zahoor Khan Author-Workplace-Name Institute of Management Sciences Peshawar-Pakistan, 2020. "An analysis of the asymmetric effect of fiscal policy on economic growth in Pakistan: Insights from Non-Linear ARDL," Business Review, IBA, vol. 15(1), pages 19-49, January -.
    4. Mohsen Bahmani‐Oskooee & Niloy Bose & Yun Zhang, 2019. "An asymmetric analysis of the J‐curve effect in the commodity trade between China and the US," The World Economy, Wiley Blackwell, vol. 42(10), pages 2854-2899, October.

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