Munich Personal RePEc Archive

The J-curve Effect in Agricultural Commodity Trade: An Empirical Study of South East Asian Economies

Trofimov, Ivan D. (2020): The J-curve Effect in Agricultural Commodity Trade: An Empirical Study of South East Asian Economies.

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Abstract

The previous research tended to examine the effects of the real exchange rate changes on the agricultural trade balance and specifically the J-curve effect (deterioration of the trade balance followed by its improvement) in the developed economies and rarely in the developing ones. In this paper we address this omission and consider the J-curve hypothesis in four South East Asian economies (Indonesia, Malaysia, Philippines and Thailand) over the 1980-2017 period. We employ the linear autoregressive distributed lags (ARDL) model that captures the dynamic relationships between the variables, and additionally use the non-linear ARDL model that considers the asymmetric effects of the real exchange rate changes. The estimated models were diagnostically sound and the variables were found to be cointegrated. However, with the exceptions of Malaysia, the short- and long-run relationships did not attest to the presence of J-curve effect. The trade flows were affected asymmetrically in Malaysia and the Philippines, suggesting the appropriateness of non-linear ARDL in these countries.

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