The J-Curve: Evidence from Fiji

Paresh Narayan () and Seema Narayan ()

International Review of Applied Economics, 2004, vol. 18, issue 3, 369-380

Abstract: This article provides new evidence on both long run and short-run determinants of trade balance for Fiji and investigates evidence of J-curve adjustment behaviour in the aftermath of a devaluation. We adopt a partial reduced form model that models the real trade balance directly as a function of the real exchange rate and real domestic and foreign incomes. Cointegration analysis is based on a recently developed autoregressive distributed lag approach—shown to provide robust results in finite samples. The long run elasticities are also estimated using a dynamic ordinary least squares approach and the Fully Modified Ordinary Least Squares (FM-OLS) approach. Amongst our key results we find that there is a long-run relationship between trade balance and its determinants. There is evidence of the J-curve pattern; growth in domestic income affects Fiji's trade balance adversely while foreign income improves it.

Keywords: Fiji; trade balance; cointegration; J-curve (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (24)

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DOI: 10.1080/0269217042000227088

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