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The bilateral J-curve: Canada versus her 20 trading partners

Mohsen Bahmani-Oskooee (), Gour Goswami () and Bidyut Talukdar ()

International Review of Applied Economics, 2008, vol. 22, issue 1, 93-104

Abstract: There is a common belief that currency depreciation worsens the trade balance in the short run and improves it in the long run resulting in the so called J-curve phenomenon. Early studies employed aggregate data and provided mixed results. Recent studies, however, have employed disaggregated data to remove any aggregation bias from their analysis. In this article we consider the Canadian experience and test the phenomenon between Canada and her 20 major trading partners. Using quarterly data and the bounds testing approach to cointegration, and error-correction modelling we were able to provide support for the J-curve in 11 out of 20 cases.

Keywords: bilateral J-curve; bounds testing; cointegration; Canada (search for similar items in EconPapers)
Date: 2008
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Handle: RePEc:taf:irapec:v:22:y:2008:i:1:p:93-104