Title: Test of the bilateral trade J-curve between the USA and Australia, Canada, New Zealand and the UK

Authors: Yu Hsing, Bruno S. Sergi

Addresses: Department of Business Administration and Finance, College of Business, Southeastern Louisiana University, Hammond, LA 70402, USA. ' DESMaS ''V. Pareto'', University of Messina, Via T. Cannizzaro, 278, 98122 Messina, Italy

Abstract: This paper examines the J-curve hypothesis for Australia, Canada, New Zealand and the UK. Applying the vector error correction model and the generalised impulse response function, this study finds that the trade balance reacts to real depreciation in several different patterns in the short run. There is lack of support for a J-curve for Australia, Canada, and the UK. In the long run, real depreciation improves the trade balance for Australia, Canada, and New Zealand and does not influence the trade balance for the UK.

Keywords: J-curve; trade balances; real depreciation; cointegrating equations; USA; United States; Australia; Canada; New Zealand; United Kingdom; UK; bilateral trade; vector error correction; generalised impulse response function; global markets.

DOI: 10.1504/IJTGM.2010.031254

International Journal of Trade and Global Markets, 2010 Vol.3 No.2, pp.189 - 198

Published online: 27 Jan 2010 *

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