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The J-curve phenomenon in Afghanistan and its major trading partners: evidence from a non-linear ARDL approach

Author

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  • Mohammad Naim Azimi

    (Kabul University)

  • Mohammad Musa Shafiq

    (Kabul University)

Abstract

This study examines the J-curve hypothesis in Afghanistan (Afg) and its major trading partners, such as China (Chn), India (Ind), Iran (Irn), and Pakistan (Pak), using a set of well-known predictors to inform model specification. Using both linear and non-linear autoregressive distributed lags (ARDL) methods to test the symmetric and asymmetric effects of the J-curve phenomenon, the initial findings confirm a long-run symmetric nexus amid predictors. The results obtained from both the linear and non-linear ARDL estimates strongly support the J-curve effects in the Afg-Ind and Afg-Pak models, while they indicate otherwise for the Afg-Chn model. Further analysis reveals that the J-curve hypothesis symmetrically exists in the Afg-Irn model. Moreover, using the dynamic multiplier approach to delve into the asymmetric effects of the bilateral real exchange rate on the trade balance, the findings indicate that due to stylized facts, both positive and negative partial sum shocks from the bilateral real exchange rate are significant to retain the J-curve effects in the Afg-Pak model, while little evidence supports the significance of the J-curve for other three trading partners. Based on the findings, appropriate policy recommendations are discussed.

Suggested Citation

  • Mohammad Naim Azimi & Mohammad Musa Shafiq, 2022. "The J-curve phenomenon in Afghanistan and its major trading partners: evidence from a non-linear ARDL approach," SN Business & Economics, Springer, vol. 2(7), pages 1-28, July.
    • Handle: RePEc:spr:snbeco:v:2:y:2022:i:7:d:10.1007_s43546-022-00239-w
    DOI: 10.1007/s43546-022-00239-w
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    More about this item

    Keywords

    J-curve; ARDL; Non-linear ARDL; Trade balance; Afghanistan;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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