Trade Balance Dynamics and Exchange Rates: In Search of the J-Curve Using a Structural Gravity Approach

Harald Badinger and Aurélien Fichet de Clairfontaine

No 256, Department of Economics Working Paper Series from WU Vienna University of Economics and Business

Abstract: This paper uses a structural gravity approach, specifying currency movements as trade cost component to derive an empirical trade balance model, which incorporates multilateral resistance terms and accounts for the cross-country variation in the exchange rate pass-through into import and export prices. The model is estimated using quarterly bilateral trade flows between 47 countries over the period 2010Q1-2017Q2, disaggregated into 97 commodity groups. Our results support the existence of an "aggregate" J-curve, pooled over commodity groups; at the same time they point to considerable heterogeneity in the trade balance dynamics across industries below the surface of aggregate data.

Keywords: exchange rate variations; gravity; J-curve; trade balance (search for similar items in EconPapers)
Date: 2018-01
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Trade balance dynamics and exchange rates: In search of the J‐curve using a structural gravity approach (2019)
Working Paper: Trade Balance Dynamics and Exchange Rates: In Search of the J-Curve Using a Structural Gravity Approach (2018)
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