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Asian Financial Crisis and the J-Curve: Evidence from South Korea

  • Artatrana Ratha
  • Eungmin Kang

    ()

    (Department of Economics, St Cloud State University)

Using an error correction version of an autoregressive distributed lag model, we investigate the dynamics of the Korean J-Curve against her eight trading partners. The strict version of the J-Curve is observed with a few major Korean trading partners, such as the U.S. and Indonesia. The estimation results from the Trade Balance Model and the Error Correction Model confirm that, after a depreciation of the Korean won, there has been a long-run adjustment toward the improvement of Korean trade balance against most trading partners. The findings are consistent over different sample periods, including before and after the financial crisis in 1997, and with different trading partners. After the Asian financial crisis, we find that the J-Curve relationship with Korean trading partners has become much more apparent than it was before the crisis.

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File URL: http://repository.stcloudstate.edu/cgi/viewcontent.cgi?article=1015&context=econ_wps
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Paper provided by Saint Cloud State University, Department of Economics in its series Working Papers with number 2007-1.

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Date of creation: Jul 2007
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Handle: RePEc:scs:wpaper:0701
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  1. Mohsen Bahmani-Oskooee & Taggert Brooks, 1999. "Bilateral J-Curve between U.S. and her trading partners," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(1), pages 156-165, March.
  2. Junz, Helen B & Rhomberg, Rudolf R, 1973. "Price Competitiveness in Export Trade Among Industrial Countries," American Economic Review, American Economic Association, vol. 63(2), pages 412-18, May.
  3. Kanta Marwah & Lawrence R. Klein, 1996. "Estimation of J-Curves: United States and Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 29(3), pages 523-39, August.
  4. Bahmani-Oskooee, Mohsen, 1985. "Devaluation and the J-Curve: Some Evidence from LDCs," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 500-504, August.
  5. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
  6. Bahmani-Oskooee, Mohsen, 1991. "Is there a long-run relation between the trade balance and the real effective exchange rate of LDCs?," Economics Letters, Elsevier, vol. 36(4), pages 403-407, August.
  7. Helen B. Junz & Rudolf R. Rhomberg, 1973. "Price competitiveness in export trade among industrial countries," International Finance Discussion Papers 22, Board of Governors of the Federal Reserve System (U.S.).
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