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

Sayeeda Bano () and Gazi Hassan ()
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Sayeeda Bano: University of Waikato, https://www.waikato.ac.nz/about/faculties-schools/management

Working Papers in Economics from University of Waikato

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.

Keywords: international trade; J-curve; New Zealand trade; exchange rates; ASEAN; RCEP (search for similar items in EconPapers)
JEL-codes: F01 F02 F10 F13 F14 Q1 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2018-03-27
New Economics Papers: this item is included in nep-int and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:wai:econwp:18/05

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