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An Empirical Examination of the J-Curve: New Zealand's Bilateral Trade with Selected Countries

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Abstract

The J-curve hypothesis holds that the devaluation or depreciation of a country’s currency worsens the trade balance in the short run before improving the balance in the long run. This study investigates the short-run and long-run effects of nominal exchange rate changes on the bilateral trade balance between New Zealand, Australia, USA, UK, China, India, Japan and Singapore using quarterly data from 1990 to 2014. The results show some evidence of J-curve effects in the case of New Zealand and China and New Zealand and Japan but with no evidence to support J-curve effects in the case of New Zealand and Australia, USA, UK, India and Singapore. Diagnostic tests, however, suggest that there are some omitted variables in the models.

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  • Sayeeda Bano & Gazi Hassan, 2018. "An Empirical Examination of the J-Curve: New Zealand's Bilateral Trade with Selected Countries," Working Papers in Economics 18/05, University of Waikato.
    • Handle: RePEc:wai:econwp:18/05
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    More about this item

    Keywords

    international trade; J-curve; New Zealand trade; exchange rates; ASEAN; RCEP;
    All these keywords.

    JEL classification:

    • F01 - International Economics - - General - - - Global Outlook
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture

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