Dynamics of the trade balance - The Turkish J-curve


Akbostanci E.

EMERGING MARKETS FINANCE AND TRADE, cilt.40, ss.57-73, 2004 (SSCI İndekslerine Giren Dergi) identifier

  • Cilt numarası: 40 Konu: 5
  • Basım Tarihi: 2004
  • Doi Numarası: 10.1080/1540496x.2004.11052584
  • Dergi Adı: EMERGING MARKETS FINANCE AND TRADE
  • Sayfa Sayıları: ss.57-73

Özet

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.