The Real Exchange Rate, the Ghanaian Trade Balance, and the J-curve

Njindan Iyke, Bernard and Ho, Sin-Yu (2017): The Real Exchange Rate, the Ghanaian Trade Balance, and the J-curve. Forthcoming in:

Abstract

Using linear and nonlinear specifications, we studied the effects of real exchange rate changes on the trade balance of Ghana during the period 1986Q1 to 2016Q3. We found no evidence in support of the short- and long-run impact of exchange rate changes on the trade balance in the linear specification. The J-curve is refuted in this case. In contrast, exchange rate changes affected the trade balance in the nonlinear specification. Depreciations improve the trade balance in the long run, but appreciations have no impact. Hence, exchange rate changes have nonlinear effects on the trade balance. This is consistent with the J-curve phenomenon.

• Item Type: MPRA Paper
• Language: English
• Keywords: Trade balance; J-curve; real exchange rates; nonlinearities; Ghana.
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; F - International Economics > F3 - International Finance > F31 - Foreign Exchange; F - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital Movements

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