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The J-Curve Hypothesis: Evidence from Commodity Trade Between South Africa and the United States

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  • H. Amusa
  • D. Fadiran

Abstract

Previous studies on the J-curve hypothesis for South Africa have relied on aggregate trade data between South Africa and the rest of the world, or on similar data for trade between South Africa and its major trading partners. The evidence of J-curve effects in South Africa's bilateral trade have been mixed. In this paper, we revisit this issue by examining the short- and long-run effects of exchange-rate changes on trade flows using disaggregated industry data on bilateral trade between South Africa and the United States. From estimates of trade balance models using the autoregressive distributed lag (ARDL) approach, we find evidence of significant J-curve effects, as a depreciation of the South African currency has favourable short-run effects on trade balances for eight industries. These short-run effects continue into the long run for a quarter of the industries considered in the study. The results also show that income has significant long-run effects on trade flows in industries that account for almost 55% of trade flows between South Africa and the United States.

Suggested Citation

  • H. Amusa & D. Fadiran, 2019. "The J-Curve Hypothesis: Evidence from Commodity Trade Between South Africa and the United States," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 43(1), pages 39-62, April.
    • Handle: RePEc:taf:rseexx:v:43:y:2019:i:1:p:39-62
    DOI: 10.1080/10800379.2019.12097343
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    Cited by:

    1. Waseem Ahmad Parray & Javed Ahmad Bhat & Effat Yasmin & Sajad Ahmad Bhat, 2023. "Exchange Rate Changes and the J-curve Effect: Asymmetric Evidence from a Panel of Five Emerging Market Economies," Foreign Trade Review, , vol. 58(4), pages 524-543, November.
    2. Ebenezer Olamide & Andrew Maredza & Kanayo Ogujiuba, 2022. "Monetary Policy, External Shocks and Economic Growth Dynamics in East Africa: An S-VAR Model," Sustainability, MDPI, vol. 14(6), pages 1-19, March.

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