How Sensitive are the U.S. Inpayments and Outpayments to Exchange Rate Changes: An Asymmetry Analysis

BAHMANI-OSKOOEE, Mohsen and Fariditavana, Hadiseh (2016): How Sensitive are the U.S. Inpayments and Outpayments to Exchange Rate Changes: An Asymmetry Analysis.

Abstract

Previous studies that assessed the impact of exchange rate changes on a country’s inpayments and outpayments assumed that such effects are symmetric. The evidence from the literature reveals that import and export prices react to exchange rate changes in an asymmetric manner. This implies that export earnings and payments for imports should also react to exchange rate changes in an asymmetric manner. We demonstrate this by using Shin et al.’s (2014) nonlinear ARDL approach and inpayments and outpayments of the U.S. with her 15 trading partners. We find evidence of short-run as well as long-run asymmetric effects in more than half of the models, though the findings are found to be partner specific.

• Item Type: MPRA Paper
• Language: English
• Keywords: The U.S., Inpayments, Outpayments, Value of the dollar, Asymmetry Analysis
• Subjects: F - International Economics > F3 - International Finance; F - International Economics > F3 - International Finance > F31 - Foreign Exchange

References

Aftab, M., Ahmad, R., Ismail, I. and Ahmed, M. (2017), “Exchange Rate Volatility and Malaysian-Thai Bilateral Industry Trade Flows”, Journal of Economic Studies, 44, 99-114.

Al-Shayeb, A. and A. Hatemi-J., (2016) "Trade openness and economic development in the UAE: an asymmetric approach", Journal of Economic Studies, Vol. 43, pp.587-597.

Baghestani, H. and S. Kherfi, (2015) "An error-correction modeling of US consumer spending: are there asymmetries?", Journal of Economic Studies, Vol. 42, pp.1078-1094.

Bahmani-Oskooee, M. (1986), "Determinants of International Trade Flows: The Case of Developing Countries", Journal of Development Economics, Vol. 20, pp. 107-123.

Bahmani-Oskooee, M. and G. Goswami (2004), "Exchange Rate Sensitivity of Japan's Bilateral Trade Flows", Japan and the World Economy, Vol. 16, pp. 1-15.

Bahmani-Oskooee, M. and H. Fariditavana, (2015), “Nonlinear ARDL Approach, Asymmetric Effects and the J-Curve”, Journal of Economic Studies, Vol. 42, pp. 519-530.

Bahmani-Oskooee, M. and S. Saha, (2015), “On the Relation between Stock Prices and Exchange Rates: A Review Article”, Journal of Economic Studies, Vol. 42, pp. 707-732.

Bahmani-Oskooee, M., H. Harvey, and S. Hegerty (2013), "Empirical Tests of the Marshall-Lerner Condition: A Literature Review", Journal of Economic Studies, Vol. 40, pp. 411-443

Bahmani-Oskooee, M., C. Economidou, and G. Goswami (2005a), “How Sensitive are the UK’s Inpayments and Outpayments to the Value of the British Pound”, Journal of Economic Studies, Vol. 32, pp. 455-467.

Bahmani-Oskooee, M., G. Goswami, and B. Talukdar (2005b), “Exchange Rate Sensitivity of the Canadian Bilateral Inpayments and Outpayments”, Economic Modeling, Vol. 22, pp. 745-757.

Banerjee, A., J. Dolado, and R. Mestre (1998), “Error-Correction Mechanism Tests in a Single Equation Framework,” Journal of Time Series Analysis 19, 267–85.

Bergstrand, J. H. (1987), “The U.S. Trade Deficit: A Perspective from Selected Bilateral Trade Models”, New England Economic Review, May-June Issue, pp. 19-31.

Bussiere, M. (2013), “Exchange rate Pass-through to Trade Prices: The Role of Nonlinearities and Asymmetries”, Oxford Bulletin of Economics and Statistics, Vol. 75, pp. 731-758.

Cushman, David O. (1987), “U.S. Bilateral Trade Balances and the Dollar”, Economics Letters, Vol. 24, pp. 363-367.

Delatte, Anne-Laure and Antonio Lopez-Villavicencio (2012), “Asymmetry Exchange Rate Pass-Through: Evidence from Major Countries”, Journal of Macroeconomics, 34, 833-844.

Durmaz, N. (2015), “Industry Level J-Curve in Turkey,” Journal of Economic Studies 42-4, 689-706.

Gogas, P. and I. Pragidis, (2015) "Are there asymmetries in fiscal policy shocks?", Journal of Economic Studies, Vol. 42, pp.303-321.

Gregoriou, A. (2017) "Modelling non-linear behaviour of block price deviations when trades are executed outside the bid-ask quotes.", Journal of Economic Studies, Vol. 44, pp.

Haynes, Stephen E., Michael M. Hutchison and Raymond F. Mikesell, (1986), "U.S. -Japanese Bilateral Trade and the Yen-Dollar Exchange Rate: An Empirical Analysis", Southern Economic Journal, Vol. 52, pp. 923-32.

Lima, L., C. Foffano Vasconcelos, J. Simão, and H. de Mendonça, (2016) "The quantitative easing effect on the stock market of the USA, the UK and Japan: An ARDL approach for the crisis period", Journal of Economic Studies, Vol. 43, pp.1006-1021.

Nusair, Salah A. (2017), “The J-curve Phenomenon in European Transition Economies: A Nonliear ARDL Approach”, International Review of Applied Economics, forthcoming.

Narayan, P.K. (2005). “The Saving and Investment Nexus for China: Evidence from Cointegration Tests,” Applied Economics Vol. 37, pp. 1979-1990.

Pal, Debdatta, and Subrata K. Mitra (2016), “Asymmetric Oil Product Pricing in India: Evidence from a Multiple Threshold Nonlinear ARDL Model”, Economic Modelling, Vol. 59, 314-328.

Pesaran, Hashem M.; Yongcheol Shin and Richard J. Smith, (2001), "Bounds Testing Approach to the Analysis of Level Relationships", Journal of Applied Econometrics, Vol. 16, pp. 289-326.

Shin, Y, B. C. Yu, and M. Greenwood-Nimmo (2014) “Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework” Festschrift in Honor of Peter Schmidt: Econometric Methods and Applications, eds. by R. Sickels and W. Horrace: Springer, Ney York, 281-314.

Verheyen, F. (2013), “Interest Rate Pass-Through in the EMU-New Evidence Using Nonlinear ARDL Framework”, Economics Bulletin, Vol. 33, No 1, pp. 729-739.