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Trade Balance Dynamics and Exchange Rates: In Search of the J-Curve Using a Structural Gravity Approach

Badinger, Harald and Fichet de Clairfontaine, Aurélien (2018) Trade Balance Dynamics and Exchange Rates: In Search of the J-Curve Using a Structural Gravity Approach. Department of Economics Working Paper Series, 256. WU Vienna University of Economics and Business, Vienna.

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Abstract

This paper uses a structural gravity approach, specifying currency movements as trade cost component to derive an empirical trade balance model, which incorporates multilateral resistance terms and accounts for the cross-country variation in the exchange rate pass-through into import and export prices. The model is estimated using quarterly bilateral trade flows between 47 countries over the period 2010Q1-2017Q2, disaggregated into 97 commodity groups. Our results support the existence of an "aggregate" J-curve, pooled over commodity groups; at the same time they point to considerable heterogeneity in the trade balance dynamics across industries below the surface of aggregate data.

Item Type: Paper
Keywords: exchange rate variations / gravity / J-curve / trade balance
Classification Codes: JEL F12, F31, F32
Divisions: Departments > Volkswirtschaft
Depositing User: Claudia Tering-Raunig
Date Deposited: 15 Jan 2018 15:18
Last Modified: 16 Apr 2018 16:38
FIDES Link: https://bach.wu.ac.at/d/research/results/84921/
URI: http://epub.wu.ac.at/id/eprint/5971

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