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Is There J-Curve Effect in the Services Trade in Canada? A Panel Data Analysis

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  • Ivan D. Trofimov

Abstract

The effects of real exchange rate changes on the sectoral trade balance have received limited consideration in the empirical literature. We examine services trade and the dynamics of Canada’s bilateral trade balance in services with its 53 major trading partners during 1990-2018. We demonstrate a short-run deterioration and a long-term improvement of the services trade balance following depreciation in an aggregate panel as well as sub-panels, hence supporting the J-curve effect hypothesis and satisfying the Marshall-Lerner condition. At the level of individual cross-sections, the evidence was mixed: a number of economies experienced long-term improvement of the trade balance, albeit without short-term deterioration.

Suggested Citation

  • Ivan D. Trofimov, 2024. "Is There J-Curve Effect in the Services Trade in Canada? A Panel Data Analysis," Bulletin of Applied Economics, Risk Market Journals, vol. 11(1), pages 51-70.
    • Handle: RePEc:rmk:rmkbae:v:11:y:2024:i:1:p:51-70
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    More about this item

    Keywords

    J-curve; Panel data; Trade balance; Exchange rate; Services.;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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