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A previous study that investigated the impact of exchange rate changes on the trade balance of Singapore with each of its 13 largest trading partners on bilateral basis found significant long-run effects in four out of 13 cases. In the trade balance between Singapore and Malaysia as a major partner, the real exchange rate had neither short-run nor long-run significant effects. To reduce the aggregation bias, in this paper, we disaggregate the trade flows between the two countries by industry and consider the trade balance of each of the 136 industries that trade between the two countries. We find that the trade balance of 79 industries are affected by exchange rate changes in the short run. However, short-run effects last into the long run in only 19 industries which mostly happen to be small industries.

Although oil prices likely influence the trade balance via macroeconomy channels (i.e. exchange rates and income), less widely recognized is the possibility of such an effect in investigating the hypothesis of a J-Curve. Thus, the primary thrust of this paper is to investigate the effect of oil prices on the J-Curve using bilateral trade data between Korea and her 14 largest partners. We uncover that the price of crude oil is indeed important in affecting the Korean trade balance and thus further validity evidence of the J-Curve. We further discover that incorporating exchange rate asymmetry provides more evidence supporting the J-Curve in the Korean trade balance.

Pakistan is a country which is facing chronic trade deficit since its independence and currency devaluation have always remained an effective strategy to bridge this gap between imports and exports. Previous studies which assessed the influence of changes in exchange rate on Pakistan’s trade balance followed a symmetric or linear approach. However, in this study we adopt an asymmetric approach, according to which appreciations and depreciations have asymmetric effects on the trade balance of Pakistan. Using commodity trade data of 28 (2-digits) industries that trade between Pakistan and United Kingdom, we find pattern of the J-curve in nine industries when a linear model was estimated. However, when we estimated a nonlinear model, the concept of asymmetric J-curve was supported in 14 industries. The largest industry (clothing) which engages in 36.5% of the trade was found to benefit from rupee depreciation.

This paper investigates the efficacy of currency management as a policy tool to improve trade balance by analyzing the impact of the real exchange rate on the bilateral trade between the United States and China. The paper builds upon the existing literature and empirical analysis is carried out based on the J-curve hypothesis using quarterly data from 2000Q1 to 2021Q4. The vector-auto regression (VAR) model is estimated using China and the United States’ trade balance, real exchange rate, and GDP. The impulse response functions provide evidence of the J-curve. A shock in Yuan (CNY)-US dollar real exchange rate leads to initial deterioration but improvement in the trade balance in favor of China over subsequent quarters. The results hold for various sub-periods of analysis, i.e., after the exchange rate was allowed to fluctuate since July 2005. Evidence supports that the policy of managing the real exchange rate might have yielded desired results for China.

The original objective of this paper is to study the impact of the exchange rate on the trade balance for Kazakhstan and Russia. Baseline empirical results indicate that an exchange rate depreciation actually decreases exports and deteriorates the trade balance for these countries; this is the opposite of the traditional theory of the J-curve and Marshall–Lerner condition. The paper then explores why these major oil exporters do not conform to the theory. It argues that it is the oil price that affects both the exchange rate and the trade balance, thereby masking the true impact of the exchange rate on the trade balance. More formally, the paper augments the traditional theory to take into account the behavior of oil prices in the export and trade balance equations. The augmented theory posits that a decrease in the oil price leads to a real exchange rate depreciation and a decline in exports, thereby creating the positive correlation seen in the baseline results. In accordance with the augmented theory, the regression results suffer from omitted variable bias; when the oil price is taken into account, the results again support the theory.

In investigating the short run and the long run impact of currency depreciation on Pakistan’s trade balance, previous studies have either relied on using bilateral trade data between Pakistan and her trade partners or between Pakistan and the rest of the world and have found not much support for successful depreciation. Suspecting that these studies may suffer from aggregation bias, in this paper we use disaggregated trade data at commodity level from 77 industries that trade between Pakistan and EU. While we find short-run significant effects in 22 industries, these effects do not last into the long run in most industries. Most of the affected industries are found to be small, as measured by their trade shares.

Previous studies that tested the short-run and long-run effects of exchange rate changes on trade balances assumed that the effects are symmetric. The more recent research direction has now changed to investigating the possibility of asymmetric effects. In this paper, we assess the short-run and long-run effects of exchange rate changes on the bilateral trade balances of Singapore with her 11 partners. By applying the nonlinear ARDL approach, which separates appreciations from depreciations, we find that exchange rate changes have short-run asymmetric effects in most models. The short-run effects, however, lasted into the long run in a few models. In the long run, while depreciation improves Singapore’s trade balance with the U.S., it hurts it with Malaysia and China. These three partners account for almost 50 % of Singapore’s trade.

This study finds that there is evidence of a J-curve for Chile, Ecuador, and Uruguay and lack of support for a J-curve for Argentina, Brazil, Colombia, and Peru. Increased real income in the home country would improve the trade balance for Brazil and Ecuador and deteriorate the trade balance for Argentina, Chile, Colombia, Peru, and Uruguay. Increased real income in the U.S. would improve the trade balance for Argentina, Chile, Colombia, Peru, and Uruguay and deteriorate the trade balance for Brazil and Ecuador. Hence, the conventional wisdom to pursue real depreciation to improve the trade balance may not apply to some of these countries.