Nonlinear Asymmetric Effects of Devaluation on Trade Balance: A Case Study of Iran and South Korea

Maryam Ebrahimi (), Kambiz Hojabr Kiani (), Abbas Memarnejad () and Farhad Ghaffari ()
Additional contact information
Maryam Ebrahimi : Department of Economics, Science and Research Branch, Islamic Azad University
Kambiz Hojabr Kiani : Depaertment of Economics, Shahid Beheshti University
Abbas Memarnejad : Department of Economics, Science and Research Branch, Islamic Azad University
Farhad Ghaffari : Department of Economics, Science and Research Branch, Islamic Azad University

Journal of Money and Economy, 2018, vol. 13, issue 1, 51-61

Abstract: The present paper analyzes the existence of a long-run relationship between the trade balance and exchange rate of Iran and South Korea by a new approach. It proposes an asymmetric co-integrating NARDL model by two positive and negative partial sum decompositions which can use mixed I (0) and I (1) variables by bounds testing approach. The proposed tests are based on calculated F –statistics and Error Correction Model (ECM) used to test the importance of the lagged levels of variables in an equilibrium correction model. Non-Linear ARDL approach has employed to study the reaction of the trade balance to currency devaluation. The bounds test of the NARDL model implies the presence of cointegration among the variables. Our empirical findings demonstrate that currency devaluation has asymmetric effects on the trade balance of Iran and South Korea by non-linear modeling. Furthermore, the J-curve phenomenon is not supported in this case.

Keywords: Non-linear Modeling; Bilateral Trade Balance; Devaluation Currency (search for similar items in EconPapers)
JEL-codes: C12 F31 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://jme.mbri.ac.ir/article-1-351-en.pdf (application/pdf)
http://jme.mbri.ac.ir/article-1-351-en.html (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:mbr:jmonec:v:13:y:2018:i:1:p:51-61

Access Statistics for this article

More articles in Journal of Money and Economy from Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran Contact information at EDIRC.
Bibliographic data for series maintained by M. E. ().