EconPapers    
Economics at your fingertips  
 

Evaluating the Persistence of j Curve Phenomenon in the Bilateral Trade between Bangladesh and USA: The ARDL Bounds Testing Approach and Granger Causality Analysis

Homamul Islam
Additional contact information
Homamul Islam: Department of Economics, Mawlana Bhashani Science and Technology University, Santosh ,Tangai-1902, Bangladesh

International Journal of Economics and Financial Research, 2021, vol. 7, issue 2, 74-81

Abstract: Most of the previously examined studies that investigated the repercussion of the trade balance to exchange rate mutation relied on the assumption that appreciation and depreciation behave symmetrically, recently several works have been conducted using the asymmetric analysis. In this work, we exhibited a model employing the disaggregated data (bilateral) of trade balance with the USA. In our pursuit, we endeavored to disclose a phenomenon of the J curve, is this pattern present in our trade balance and exchange rate bearing? In this article, first, we checked the stationary of data set and discovered the stationary employing the Augmented Dickey-Fuller test, Phillips Peron then applying the ARDL bounds test of cointegration apropos to find out the long run co integrated equations and last of all, tried to investigate the short-run and long-run relationship among the variables, while we used the ECM (error correction model). The Toda-Yamamoto Procedure for Granger Causality in a VAR framework has been applied to detect the causal direction. In our model, we have blazoned the negative short-run rapport between the exchange rate and trade balance in the bilateral data, whereas we have remarked a discrepant bearing in the long run and we did receive the evidence of the appearance of j pattern in the relationship between exchange rate and trade balance. Dispensing the error correction model, we found domestic higher price level hinders the trade balance in the short run, did not find any evidence of foreign income stimulate the export. Toda-Yamamoto Procedure for Granger Causality reveals the unidirectional causal effect from exchange rate to trade balance of Bangladesh with the USA.

Keywords: Trade balance; Exchange rate; Inflation rate; ARDL bounds test; Granger causality test; Stability test. (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.arpgweb.com/pdf-files/ijefr7(2)74-81.pdf (application/pdf)
https://www.arpgweb.com/journal/5/archive/06-2021/2/7 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arp:ijefrr:2021:p:74-81

Access Statistics for this article

International Journal of Economics and Financial Research is currently edited by Dr. Abu Hassan Bin Md Isa

More articles in International Journal of Economics and Financial Research from Academic Research Publishing Group Rahim Yar Khan 64200, Punjab, Pakistan.
Bibliographic data for series maintained by Managing Editor (info@arpgweb.com).

 
Page updated 2024-12-28
Handle: RePEc:arp:ijefrr:2021:p:74-81