J-curve disparity between the goods sector and the services sector: Evidence from Australia

Albert Wijeweera, Brian Dollery

    Research output: Contribution to journalArticlepeer-review

    7 Scopus citations

    Abstract

    The J-curve effect phenomenon suggests that the currency devaluation would worsen the trade balance in the short run, but improve it in the long run. This article uses quarterly Australian data over the period 1988 to 2011 to examine whether J-curve effects are different between the two main components of the trade account: the goods sector and the services sector. Using the bound testing approach to cointegration and error correction modelling, we find some evidence to support the J-curve phenomenon, but the impact of real exchange rate on the trade account seems complex. While the services sector displays a J-curve effect, the goods sector response is quite the opposite: it has a positive response in the short run, but a weak negative response in the long run.

    Original languageBritish English
    Pages (from-to)452-456
    Number of pages5
    JournalApplied Economics Letters
    Volume20
    Issue number5
    DOIs
    StatePublished - Mar 2013

    Keywords

    • Australia
    • bound testing approach
    • J-curve
    • trade account

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