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The alternative version of J-curve hypothesis testing: Evidence between the USA and Canada

Author

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  • Serdar Ongan
  • Huseyin Karamelikli
  • Ismet Gocer

Abstract

This study aims to eliminate an embedded data bias in testing the J-curve hypothesis in relevant literature. In all previous trade models about the J-curve, the bilateral trade balance (BTB) ratio, as the dependent variable, is generated and used based on total exports data, i.e. as total exports over total import. However, total exports are the sum of domestic exports and re-exports, and some countries also re-export to their partners. Furthermore, the dynamics and impacts of changing exchange rates on export volumes of domestically produced goods may differ from those on re-exported goods. Therefore, in this study, in testing the asymmetric J-curve hypothesis, we, for the first time, re-define two new proposed forms of BTBs, namely, domestic-export-based J-curve hypothesis BTB and re-export-based J-curve hypothesis BTB, based on domestic exports and re-exports, respectively, for USA–Canada trade. The main finding shows that the numbers of industries that support the asymmetric J-curve concerning these two forms of BTBs are entirely different. While the J-curve is supported by domestic-export-based J-curve hypothesis BTB for 27 industries, it is supported by re-export-based J-curve hypothesis BTB for 38. This support is 22 for the total-export-based J-curve hypothesis BTB.

Suggested Citation

  • Serdar Ongan & Huseyin Karamelikli & Ismet Gocer, 2023. "The alternative version of J-curve hypothesis testing: Evidence between the USA and Canada," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 32(7), pages 1130-1185, October.
    • Handle: RePEc:taf:jitecd:v:32:y:2023:i:7:p:1130-1185
    DOI: 10.1080/09638199.2022.2155689
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    Cited by:

    1. Serdar Ongan & Ismet Gocer & Huseyin Karamelikli, 2023. "The US State-Level Geographic J-curve Hypothesis Mapping with Canada," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 43(2), pages 203-240, August.

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