Dynamics of the trade balance - The Turkish J-curve

Date

2004-09-01

Author

Akbostancı Özkazanç, Elif

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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

The J-curve hypothesis suggests a specific pattern for the response of the trade balance to real exchange rate changes; a real depreciation initially worsens the trade balance, but through time the trade balance improves, and thus the response of the trade balance over time generates a tilted J-shape. This study investigates the existence of a J-curve in the Turkish data in the 1987-2000 period by using quarterly data. First, an error correction model is estimated to differentiate between the long-run equilibrium and short-run dynamics. Then the response of trade balance to real exchange rate shocks is investigated by using the generalized impulse response methodology Even though the suggested long-run pattern, which is the improvement of the trade balance in response to a real depreciation emerges, our results do not exactly support the J-curve hypothesis in the short run.

Subject Keywords

General Economics, Econometrics and Finance, Finance

URI

https://hdl.handle.net/11511/38660

Collections

Department of Economics, Article