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Economic Change and Restructuring

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12.08.2017

Is there a J-curve effect in Tunisia’s bilateral trade with her partners? New evidence from asymmetry analysis

verfasst von: Mohsen Bahmani-Oskooee, Thouraya Hadj Amor, Hanafiah Harvey, Huseyin Karamelikli

Erschienen in: Economic Change and Restructuring | Ausgabe 1/2019

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Abstract

Recently a new direction on the relation between the exchange rate and the trade balance has emerged where the emphasis is on application of asymmetry analysis and nonlinear models. Whereas, the linear models have failed to provide strong support for the J-curve effect, the nonlinear models have proved to be fruitful. We add to this later literature by estimating bilateral trade balance models of Tunisia with her six large partners. The results reveal that exchange rate changes do have short-run asymmetric effects in all six models, short-run adjustment asymmetric effects in three models, and significant long-run asymmetric effects in three models.

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For a detailed review of these studies see the review article by Bahmani-Oskooee et al. (2013).

Bahmani-Oskooee and Ratha (2004) and Bahmani-Oskooee and Hegerty (2010) are too review articles on the J-curve effect.

The models and methods and their explanations will closely follow Bahmani-Oskooee and Fariditavana (2016).

Note that if increase in income is due to an increase in the production of import substitute goods, an estimate of b (c) could also be negative (positive). For details see Bahmani-Oskooee (1986).

For more on some other application of these methods see Gogas and Pragidis (2015), Durmaz (2015), Baghestani and Kherfi (2015), Al-Shayeb and Hatemi-J (2016), Lima et al. (2016), Nusair (2016), Karameklil (2016), Aftab et al. (2017), Arize et al. (2017), and Gregoriou (2017).

Note that to account for Global Financial Crisis of 2008, we included a dummy variable which took a value of zero before January 2008 and 1 thereafter. Since the dummy was insignificant in all linear and nonlinear models, we excluded it.

Note that in the bilateral model with Germany, the exchange rate carries a significantly negative long-run estimate. This could be due to an inelastic import demand by Tunisia for German goods. As dinar depreciates, German goods become expensive and cost of imports rise due to an inelastic import demand.

Note that the same procedure is carried out in the nonlinear model where in the nonlinear case the long-run model takes the following form: \( LnTB_{i,t} = a + bLnIP_{TUN,t} + cLnIP_{i,t} + d^{ + } POS_{i,t} + d^{ - } NEG_{i,t} + \varepsilon_{t} . \)

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Titel: Is there a J-curve effect in Tunisia’s bilateral trade with her partners? New evidence from asymmetry analysis
verfasst von: Mohsen Bahmani-Oskooee
Thouraya Hadj Amor
Hanafiah Harvey
Huseyin Karamelikli
Publikationsdatum: 12.08.2017
Verlag: Springer US
Erschienen in: Economic Change and Restructuring / Ausgabe 1/2019
Print ISSN: 1573-9414
Elektronische ISSN: 1574-0277
DOI: https://doi.org/10.1007/s10644-017-9216-3

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